SOURCE: Paragon Financial Limited

Paragon Financial Limited

April 27, 2012 08:20 ET

Health Insurers to Pay $1.3 Billion in Rebates - Shares of Aetna and UnitedHealth Group Dip

The Paragon Report Provides Stock Research on Aetna and UnitedHealth Group

NEW YORK, NY--(Marketwire - Apr 27, 2012) - Health insurance companies' shares fell Thursday as independent study showed that health insurers will pay $1.3 billion in rebates. Nearly half of that sum is expected to be paid back from four major insurers: United Healthcare Group Inc., WellPoint Inc., Aetna Inc. and Coventry Health Care Inc. according to Goldman Sachs. The Paragon Report examines investing opportunities in the Health Care Plans Industry and provides equity research on Aetna Inc. (NYSE: AET) and UnitedHealth Group Inc. (NYSE: UNH).

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Under the Patient Protection and Affordable Care Act health insurers must spend 80 percent of premiums from individuals and small businesses, and 85 percent of premiums from large employers on health expenses and quality improvements. If an insurer does not spend enough on health costs it must refund the difference back to the consumer. According to a study published by the Kaiser Family Foundation approximately 31 percent of individual policyholders, or around 3.4 million people, are expected to get rebates.

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Aetna shares dropped sharply Thursday as the company reported a drop in quarterly net income. Net income for the first quarter of 2012 was $511.0 million, or $1.43 per share, including $.09 per share of net realized capital gains. Net income for the first quarter of 2011 was $586.0 million, or $1.50 per share, including $.07 per share of net realized capital gains.

UnitedHealth was reported to owe roughly $307 million on $28.8 billion in eligible premiums. The Company increased its outlook for 2012 net earnings to a range of $4.80 to $4.95 per share and cash flows from operations to a range of $6.2 billion to $6.5 billion on revenues of $109 billion to $110 billion.

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