2008 hasn't exactly been kind to UnitedHealth Group
How'd the market take the news? Shares dropped another 2% yesterday, bringing the total year-to-date drop to a whopping 56%. Fellow health insurance companies haven't fared much better; Humana
The problem for UnitedHealth is that there's a lot of competition out there, and no matter what it did, earnings were likely to suffer. It basically had two options: It could lower premium costs to retain business and risk losing money on the business due to skyrocketing health care costs; or it could keep premium costs up -- which directly affects the top and bottom line -- and lose business. UnitedHealth has chosen the latter, which will result in the projected loss of 800,000 members for the year. The company is in the process of reducing costs, including cutting 4,000 workers, to try to turn things around next year.
The company is also trying to get some lawsuits behind it. Yesterday, it settled with two retirement systems for $895 million over UnitedHealth's backdating of employee stock options. While seeing the company pay out money isn't exactly positive, at least investors have one less thing to worry about.
The good news for UnitedHealth, Aetna
More Foolishness on ailing health insurers: