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UnitedHealth Group is the largest health insurance company in the United States. Through its UnitedHealthcare and Optum subsidiaries, it provides individual insurance, employer sponsored health insurance, managed care, health and wellness services, healthcare advisory & technology solutions and pharmacy benefits management services. The end users include retail customers, pharmacies, doctors, hospitals & health care centers, employers and government. Further, its business model faces stiff challenges and competition from offerings by its global competitors such as Humana, Aetna, Cigna and WellPoint.

Trefis details the key components of UnitedHealth’s Revenues in an interactive dashboard, along with our forecast for the next three years. While net revenues have grown at an average annual rate of 11% over the last three years, we expect the growth rate to slow down in coming years. Further, UnitedHealth’s net revenues are expected to increase from $226.2 billion in 2018 to $275.8 billion by 2021, mainly driven by growth in UnitedHealthcare Medicare & Retirement segment. You can make changes to our forecast for individual revenue streams in the dashboard to arrive at your own forecast for the company’s revenues. Additionally, you can see more Trefis data for Heath Care companies here.

[A] UnitedHealthcare Medicare & Retirement revenues are expected to cross $97.5 billion by 2021

This segment provides healthcare services, primarily to individuals aged 65 or older, and is UnitedHealth’s largest segment in terms of revenues.

Although Medicare enrollments have grown at an average annual rate of 5% over 2016-2018, we expect the growth rate to slow down in the coming years.

Further, strong growth of monthly Medicare premiums is expected to continue in the subsequent years, leading it to cross $539 by 2021

This should help segment revenues grow at an average annual rate of 9% and cross $97.5 billion by 2021.

[B] UnitedHealthcare Employer & Individual revenues have struggled over the last three years.

This segment offers individual insurance and employer-sponsored health insurance plans for employees

The lackluster performance over the last three years can be attributed to a drop in the number of policyholders from 30.6 million in 2016 to 26.9 million in 2018. However, we expect the numbers to improve in subsequent years and cross 27.5 million by 2021.

Average monthly health insurance premiums increased by 17% y-o-y in 2018. Further, it is expected to grow at an average annual rate of 2% and cross $183 by 2021.

This implies an average annual rate of 3% in segment revenues – helping the figure cross $60.3 billion by 2021.

[C] UnitedHealthcare Community & State is expected to grow at a slower pace over the next three years.

This division provides managed care solutions and insurance coverage to beneficiaries under the U.S. government’s Medicaid program.

It reported a 14% jump in Medicaid enrollments in 2017, before it dropped by 4% in 2018. We expect the enrollments to recover in coming years and cross 7 million by 2021.

Average monthly Medicaid premiums are expected to grow at an average annual rate of 3% over the next three years – from $561 in 2018 to $610 by 2021.

This should result in segment revenues reaching $51.4 billion by 2021.

[D] UnitedHealthcare Global has added 2 million enrollments over 2016-2018, however it is expected to add only 400K over the next three years

This segment provides healthcare services to governments, corporates and individuals in more than 130 countries, with a strong presence in Brazil.

International enrollments are expected to grow at a slower pace over the next few years – from 6.2 million in 2018 to 6.6 million by 2021.

This implies that segment revenues will likely increase to roughly $10.8 billion by 2021.

[E] Optum Health revenues are expected to cross $33.3 billion by 2021

It offers health and wellness services to individual, business and government customers

The segment revenues have increased by 43% over the last three years, from $16.9 billion in 2016 to $24.1 billion in 2018. Further, we expect the same trend to continue in subsequent years.

[F] Optum Insight revenues would cross $10.8 billion by 2021

It deals in software products along with information, advisory and outsourcing services for healthcare industry

The segment revenues have grown at an average annual rate of 11% over 2016-2018. However, we expect the growth rate to reduce by half in the subsequent years.

[G] OptumRX revenues are expected to increase by 22% over the next three years.

This segment is responsible for processing and paying prescription drug claims of its clients

Number of retail prescriptions has seen steady growth over 2016-2018. We expect the same trend to continue and help the figure to increase by 200 million in the next three years.

At the same time, revenue per retail prescription would appreciate by 12% over the same period.

This would enable the segment revenues to maintain its current momentum and cross $84.6 billion by 2021 – consolidating its position as the second largest division for the company in terms of revenues.

[H] Eliminations are deducted from Gross Revenues to calculate Net Revenue figure. UnitedHealth reported Eliminations of $59.9 billion in 2018.

Due to the overlapping nature of UnitedHealth’s revenue streams, certain revenue components are included in more than one segment. These overlapping components are categorized as Eliminations.

Eliminations are expected to increase by 22% (about $13.1 billion) in the next three years, while its share of Gross Revenues would remain the same.

Trefis

Trefis estimates UnitedHealth’s stock (shows cash and valuation analysis) to have a fair value of $293, which is 25% higher than the current market price. Our price estimate incorporates changes to our forecast based on UnitedHealth’s earnings release last month.

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