United Health Group and the Health Reform Policy - Essay Example

? United Health Group and the Health Reform Policy United Health Group and the Health Reform Policy United health group dominates the insurance company in the united sates with branches across all the states and additional 33 countries. The group ranks among the largest three insurance companies in the United States that offer health insurance. The group strives to provide all people an access to quality health care. The passing of the health care reform act is one of the events that have had measurable effects on the majority of American health insurance industry. This paper will analyze the activities of the group, its strengths, and weaknesses and highlight how health insurance reforms will affect the group’s standing. Business Activities and International Activity The united health group operations fall under two main categories. These include the united health care and optum. Under each of these activities, there are distinct business units that define the services offered by united health group. United health care employer and individual unit offers a comprehensive package of health benefit plans specific for the public sector, individuals, employers, and educational institutions. In addition, the united health care Medicare and retirement unit strives to provide Americans aged 50 years and above with health security through preventive services and chronic disease management. Moreover, the united health care community and state unit strives to provide societies and communities to care for those facing economical hardships and those without employer-funded health insurance (United Health Group, 2012). On the other hand, optum health strives to enhance the well-being of people in society by offering health management plans that help people live healthier lives. In addition, optum insight offers information concerning the health care sector in society. Optumrx helps in delivering customer prescriptions and integrated pharmacy services. The united group provides such a wide range of health care services in the United States and additional 33 countries. Strengths According to the EBSCO analysis (2011), united health group has several strengths that make it stand out in the health insurance market. In the first place, the group takes a lead in the market. For consecutive years, it has managed to remain a dominant leader in the market. Being a leader in the market, the health group has a shorter sales system in the market because vast awareness of its services in the market. In addition, leadership in the market earns the group loyalty from clients. United health group has earned publicity in the United States and is a preferable choice for many people. The fact that united health group has diversified services is an additional strength. The group can make profits from a vast range of services. In addition, the group registers a great financial performance in the health insurance sector. Weaknesses The united health group has several weaknesses that serve to give its competitors an advantage in the market. Statistics show that the company has numerous debts. Being in debt places unwanted pressure on the group because it has to ensure a continuous flow of cash to enable it pay the debts. In addition, debt brings along numerous restrictions to the group, negatively affecting its operations. Indebtedness affects the company’s financial stability placing it in an unfavorable position in the market. In addition, stock option practices have often affected the company’s reputation in the market. Reports indicate that the company has indulged in unfavorable stock practices affecting its operations (EBSCO Publishing, 2011). The signature of the health care reform act by president Obama had an impact on the insurance sector. The reform introduces a form of regulation by the government, a factor that affects the growth in the industry. The group has the privilege to run the Medicaid insurance plan, which is a contract from the government. The reform requires an increase of the beneficiaries of Medicaid insurance. The expansion has the potential of including 17 million new individuals. This expansion is bound to increase the client base of united health group, being the contractor. This will cause a shift in the financial outcomes of the united health group. However, this event presents both opportunities and threats for the group because of its vast requirements. On the other hand, the government regulation introduces change in the senior citizens health programs (Dunning, 2012). Financial Analysis of the Opportunity Since united group has been offering health care services to over 4 million people who are beneficiaries of the Medicaid health insurance plan offered by different states. The reform requires an expansion of up to 17 million new beneficiaries (Economic policies for the twenty-first century, 2012). The signature of the health reform caused a freak to the entire insurance company. After united healthy group adopted some aspects of the reform in 2010, it tested waters for other insurance companies. In the first quarter of the 2011 financial year, the group registered growth in profits. This proved many of the prospects about implementation of the reform wrong. The presence of currently uninsured people in the U.S population is an opportunity for the group (Dunning, 2012). The group’s profits rose by 23 percent because of higher enrollment rates. In addition, there was a marked lower spending for the group contributing to the registered profit rise. A net increase of up to 1.56 billion U.S dollars was evident, a rise from previous 1.27 billion dollars. The group’s revenue registered an 8 % increase. The enrollment level rose to 670,000 new people. The group attributed the high increase from Medicaid beneficiaries. This led to an increase of the revenue. On the other hand, lower spending resulted from a different scheme of paying doctors according to performance merits. This translates to a provision of quality services but at lower prices. This scheme applies to about 70% of the group’s commercial employers. The graph below predicts the increase of Medicaid that is likely to enable the group to register higher profits in the future. Currently, it offers Medicaid health services in 23 states (Ridder, 2012). Retrieved from http://www.dailyfinance.com/2012/07/16/wellpoints-5-billion-bet-on-obamas-re-election/ However, the group will adjust ways in which it transacts business. These adjustments will possibly lead to laying off insurance agents. According to the reform, higher premiums paid by people result from the inclusion of commission paid to agents. Insurance companies have the task of instituting new marketing strategies. The new marketing strategies for their policies are likely to lead companies to register a rise in profits. This is the implication because insurers will spend the premiums on other tasks that are likely to bring in more revenue. Potential Threats of the Event Since the change of mechanisms will apply to each health insurance company, it will not have a great impact on competition in the industry. In addition, the reform requires the institution of new exchanges in the health insurance company. Increased competition is likely to result to new strategies of survival in the market. The group is afraid of performance that will result. On a different note, the reform will regulate the loss ratios of health insurance in the sector. The government requires insurance companies to register 80/20 medical loss ratios. This will ensure that the insurers do not overcharge the payers in premiums. Since this part of the reform is under operation currently, it has forced the insurance industry to part with over a billion in paying rebates to people. United health group, like other insurers paid 151 dollars to each individual as rebate (Carlson, 2011). The concept of medical loss ratio has further implications. Since the government will have a fixed rate that will require each insurer to dedicate four dollars to health care services for each dollar spent in profit-making. Limiting the percentage of medical loss ratio to 80% limits the amount of profits the company can make according to Speights (2012). Majority of the insurers in the industry have to make readjustments of practices to provide quality health care to Americans while making a profit as well. The implementation of the challenge poses potential challenges for united health group (Reuters, 2012). The company requires effective strategies that will help protect the insurer from destabilization that is likely to result. The leaders of the group face a level of uncertainty of the future. Although the group promises to offer some benefits of the reform even if the mass overturns the reform, the bigger picture needs strategic action. The group has to readjust to cheaper premiums, but higher spending in paying for health services. Although the company has an additional advantage if Medicaid enrollment continues with the current increasing trends, it has to make readjustments in its business strategy. Political events affect businesses in multiple ways presenting the business with opportunities and risks. Businesses must assess these opportunities and their implications in the markets and make the necessary adjustments. Failure to adjust effectively can destabilize a company’s performance in the market often leading to losses. Businesses must analyze the future trends resulting from the political event and formulate new strategies in its sectors. The Obama care reform has potential effects on the providers of health coverage in the United States. The reform requires these insurers to offer lower cost premiums to make health insurance accessible to a greater population. The united health group is one of the insurers that are making adjustments and facing future uncertainties concerning performance. On one side, the policy will increase Medicaid beneficiaries for united health group presenting it with an opportunity to increase revenue from new enrollments. The company is managing the situation effectively for now. Its performance in the future will depend on its future strategies and the real situation of the markets. References Carlson, J. (2011). Four Health insurers to pool claims in research database. Retrieved on 26 October 2012 from http://www.businessinsurance.com/article/20110920/NEWS03/110929983?tags=|307|74 Dunning, M. (2012). UnitedHealth is top performing publicly traded health insurer. Retrieved on 31 October 2012 from http://www.businessinsurance.com/article/20120819/NEWS03/308199998?tags=|307|74 EBSCO Publishing. (2011). Datamonitor: United Health Group Incorporated. Retrieved on 31 October 2012 from http://connection.ebscohost.com/c/company-reports/65480723/datamonitor-unitedhealth-group-incorporated Economic policies for the twenty first century. (2012). Health care primer: an introduction. Retrieved on 26 October 2012 from http://obamacarewatch.org/primer Reuters. (2012). UnitedHealth to buy most of Brazil’s Amil for $4.9 billion. Business Insurance. Retrieved on 26 October 2012 from http://www.businessinsurance.com/article/20121008/NEWS04/121009926?tags=|63|307|306|285 Ridder, K. (2012). United health group third quarter profits rise 23%. Retrieved on 26 October 2012 from http://investing.businessweek.com/research/stocks/news/article.asp?docKey=600-201210161409KRTRIB__BUSNEWS_55883_16464-1¶ms=timestamp||10/16/2012%202:09%20PM%20ET||headline||UnitedHealth%20Group%20third-quarter%20profits%20rise%2023%20percent%20[Star%20Tribune%20%28Minneapolis%29]||docSource||Knight%20Ridder/Tribune||provider||ACQUIREMEDIA&ticker=AMIL3:BZ Speights, K. (2012). Wellpoint’s $5 Billion Bet on Obama’s Re-election. Retrieved on 26 October 2012 from http://www.dailyfinance.com/2012/07/16/wellpoints-5-billion-bet-on-obamas-re-election/ United Health Group. (2012). Our Businesses. Retrieved on 26 October 2012 from http://www.unitedhealthgroup.com/main/Businesses.aspx Read More