April 18, 2017 / 6:30 PM / 3 months ago

UnitedHealth plans for costly Obamacare tax in 2018

The logo of Down Jones Industrial Average stock market index listed company UnitedHealthcare is shown in Cypress, California April 13, 2016.Mike Blake/Files

REUTERS - UnitedHealth Group Inc reported stronger-than-expected quarterly results on Tuesday and said it was coping with uncertainty in U.S. healthcare laws by pricing its 2018 insurance plans to include a costly Obamacare tax.

President Donald Trump and other Republicans have vowed to repeal Obamacare, formally known as the Affordable Care Act, but have been unable to agree on a law to do that. That means the 3 percent tax collected on all health insurance plans, currently on a hiatus, is due to take effect again next year.

As a result, U.S. health insurers are uncertain about how to price their plans and what benefits to include in 2018. Those selling Obamacare individual plans are particularly affected by these and other regulatory questions, but UnitedHealth's comments show that the lack of certainty has broad reach for the industry.

UnitedHealth, the biggest U.S. health insurer, pulled out of the individual insurance market created under Obamacare this year.

The health insurance tax affects pricing and benefits for all healthcare plans, including small business and government policies, which UnitedHealth must submit to state and federal regulators in the next few months.

"Our plans continue to assume the tax will return in 2018, which will raise premiums and/or reduce benefits for commercial businesses, states and our nation’s senior population," UnitedHealth Chief Executive Officer Stephen Hemsley said during a conference call with investors to discuss earnings.

The company said first-quarter results benefited from strength across its businesses, and it raised its profit and revenue forecasts for the year.

The company's shares were up less than 1 percent at $168.27.

"This is a great quarter, and there is a lot of upside this year," but uncertainty about U.S. tax policy could create obstacles next year, Leerink analyst Ana Gupte said.

Trump has pledged to overhaul taxes, but details are unclear.

UnitedHealth said net earnings rose to $2.17 billion, or $2.23 per share, from $1.61 billion, or $1.67 per share, a year earlier.

Excluding special items, the company earned $2.37 per share, beating the analysts' average estimate of $2.17, according to Thomson Reuters I/B/E/S.

Revenue rose 9.4 percent to $48.73 billion.

The company had 2.5 million more people across its insurance plans, offset by a loss of 900,000 who were in individual Obamacare plans. That market withdrawal, and the 2017 health insurance tax hiatus, reduced consolidated revenue by about $1.6 billion for the quarter, UnitedHealth said.

Editing by Lisa Von Ahn

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