By Caroline Humer
(Reuters) - UnitedHealth Group Inc <UNH.N> is still losing money on the individual insurance business created under U.S. President Barack Obama's national healthcare reform law due to customers' high medical costs, the company said on Tuesday.
The largest U.S. health insurer said that it was booking $200 million in losses in the second quarter to cover higher-than-anticipated use of medical services by customers this year. UnitedHealth and other insurers have blamed those costs for their losses from the exchange business.
The company said it expected the program, often called Obamacare, to reduce 2016 earnings by about $850 million, up from $475 million in 2015.
Next year, it will exit most of the two dozen states where it sells individual insurance on the exchanges but still has plans to sell in Nevada, New York and Virginia.
"We do not expect any meaningful financial exposure on 2017 business from the three or fewer exchange markets where we currently plan to remain," Chief Executive Officer Stephen Hemsley said on a conference call with analysts to discuss second-quarter financial results.
Individual exchange customers this year have more severe chronic conditions, such as diabetes, chronic obstructive pulmonary disease and HIV, and attrition has been lower than expected, UnitedHealth said. It expects to end 2016 with 750,000 exchange members.
The company said its other businesses, including pharmacy benefit management and the technology and consulting divisions, were strong, and it reported higher-than-expected earnings and revenue for the second quarter.
UnitedHealth, which also sells employer-based insurance as well as Medicare and Medicaid, raised the low end of its full-year profit outlook to $7.80 per share from $7.75 and kept the high end at $7.95.
Shares of UnitedHealth were up 0.5 percent at $141.42. It is the only large insurer not involved in any of the major consolidation deals under review by antitrust regulators.
Other insurers were off slightly on the announcement but lost ground after a report that antitrust regulators were planning to block their deals. Aetna Inc <AET.N> was off 3.6 percent at $114.90, while Anthem Inc <ANTM.N> fell 2.9 percent to $131.11. Cigna Corp <CI.N> was down 2.3 percent at $130.02 and Humana Inc <HUM.N> gave up 5.3 percent to $151.10.
Mizuho analyst Sheryl Skolnick said UnitedHealth's Obamacare business could further weigh on 2016 profit, given that more members have stayed on than expected and will have higher expenses during the second half.
"They have tried as much as they can... to take as much of the losses as they can," Skolnick said.
Revenue from the company's Optum business, which manages drug benefits and offers healthcare data analytics services, rose 51.5 percent to $20.6 billion from a year earlier.
Net earnings rose to $1.75 billion, or $1.81 per share, from $1.59 billion, or $1.64 per share, a year earlier.
(Reporting by Caroline Humer in New York and Amrutha Penumudi in Bengaluru; Editing by Lisa Von Ahn)