UnitedHealth is not a crook

UnitedHealth Group (symbol UNH) has paid its shareholders $1.5bn so far this year, through its stock repurchase program, and an additional $55mn from its paltry dividend of $.03 per share. That compares nicely with its reported earnings of over $1.8bn in the first six months. Shareholders’ equity is at $21.5bn, so there is a return on equity of 7.2% in the first half.

UNH has four business segments: healthcare services, Optum, Ingenix, and prescription services. Ingenix has the distinction of owning the Lewin Group, described by the Washington Post as “…a consulting firm whose research has been widely cited by opponents of a public insurance option….”

Ingenix supplied its parent company and other insurers with data that allegedly understated the "usual and customary" doctor fees that insurers use to determine how much they will reimburse consumers for out-of-network care.

Allegedly may be a euphemism: in settlements with the New York Attorney General and the American Medical Association, Ingenix paid a total of $400mn and agreed to exit the business.

Lewin Group Vice President John Sheils said his firm had nothing to do with the allegedly flawed Ingenix reimbursement data. Lewin has gone through "a terribly difficult adjustment" since it was bought by UnitedHealth in 2007, because the corporate ownership "does create the appearance of a conflict of interest."

"It hasn’t affected. . . the work we do, and I think people who know me know that I am not a good liar," Sheils said.

I, of course, don’t know, but when people say they aren’t liars, I think of Richard Nixon, who wasn’t a crook.

The healthcare side of the UNH includes UnitedHealthcare, which accounted for over half of second quarter revenues.

Second quarter revenues of $10.3 billion decreased $223 million year-over-year. During the second quarter UnitedHealthcare experienced declines of 150,000 people served through fee-based programs and 260,000 people in risk-based health benefit plans. Membership attrition at continuing clients driven by economic pressures on their organizations was the most significant factor in the decreases, accounting for three-fourths of the total membership decline.

In the first quarter, “Compared to year end 2008, UnitedHealthcare served 445,000 fewer people through risk-based products and 460,000 fewer people through fee-based products at March 31, 2009.”

The other major component of revenues is Ovations, which deals with people over 50:

Ovations participates nationally in the Medicare program, offering a wide-ranging spectrum of Medicare products, including Medigap products that supplement traditional fee-for-service coverage, more traditional health-plan-type programs under Medicare Advantage, Medicare Part D prescription drug coverage, and special offerings for beneficiaries who are chronically ill and/or Medicare and Medicaid dual-eligible.

Its revenues were up 13% in the second quarter, thanks to substantial growth in Medicare Advantage, the federal subsidy for private insurance companies hoping to get into the Medicare business. Or maybe it was just their “strengthened market design”.

In other words, UNH is making money off taxpayers, while the private health insurance business is trending down with the economy. No wonder these guys are spending money like drunken sailors to get Congress to make people buy insurance from them, and subsidize the people who can’t pay for it themselves.