2008 hasn't exactly been kind to UnitedHealth Group (NYSE:UNH). On top of a $0.40-per-share cut in yearly guidance last quarter, the health insurer announced Wednesday that it's slashing guidance by as much as another $0.60 per share, pushing adjusted full-year guidance to between $2.95 and $3.05 a share. Ouch!

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 (NYSE:HUM) and Coventry Health Care (NYSE:CVH) are both off by more than 45% year-to-date.

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 (NYSE:AET), Cigna (NYSE:CI), and all the other health insurance companies is that they're providing a service that people still need. The better news is that the companies get a "do over" every year, since premiums reset annually. Good luck in 2009, health insurance industry.

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