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Is Unitedhealth an Obamacare Casualty?

Is UnitedHealth an Obamacare Casualty?

On Tuesday, UnitedHealth Group (NYSE:UNH) told shareholders to expect the Affordable Care Act to have a net drag on earnings of 90 cents to $1 per share in 2014.

Breaking down those costs, the insurer anticipated costs totaling 5 cents to 10 cents per share related the reforms of the individual market, 25 cents for cuts in funding for privately-run Medicare plans for the elderly, and 65 cents per share for the reinsurance pool and other fees, according to documents issued at aDecember 3 investor meeting held in New York.

The $10-billion reinsurance pool is meant to insult insurance costs from the shock of offering coverage to those previously uninsured customers or those who were enrolled in high risk plans, and UnitedHealth will pay an estimated $500 million in fees to support that pool, to be paid in the first quarter in 2015. In return for the privilege of selling insurance on the exchanges, the federal government will charge UnitedHealth fees totaling between $1.3 billion and $1.4 billion, fees that will be paid in the third-quarter of 2014. A similar caution echoed through a recent report by Morgan Stanley; analysts expect 2014 to be a difficult year for insurance companies.

On October 1, the cornerstone provision of the healthcare reform — the online insurance marketplaces — launched, selling insurance policies for coverage beginning in 2014. Three years in the making, the federal and state-run exchanges were meant to allow consumers to comparison-shop for health insurance policies in online marketplaces, which were designed to give individual customers collective bargaining power, fostering competition and driving down prices. But, to make health insurance more affordable, the healthcare reform did more than merely change how insurance was purchased. It also sought to make insurance products more affordable by corralling how much insurers could charger older policyholders, sicker policyholders, and women for coverage.

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