UnitedHealth Group Incorporated is a managed healthcare company that has operated both in the US and global healthcare market for more than forty years, becoming one of the leading medical service providers worldwide. While operating two primary business branches, Optum and UnitedHealthcare, UnitedHealth Group, Inc. managed to excel a total revenue of $257 billion, outrunning the vast majority of its competitors (United States Security and Exchange Commission [SEC], 2021). However, in order to define the potential of the company’s development, as well as its current socio-economic and political environment, A PEST analysis will be conducted. According to Clarke (2019), the basic PEST analysis includes an overview of political and regulatory forces, the prevailing economic systems and growth rates, socio-cultural aspects of the target demographics, and the technological aspects of the market. Hence, all these factors will be included in the following assessment.
Political Factors
UnitedHealth Group, Inc. is a multinational managed care company with headquarters located in Minnesota, US. While operating in more than thirty countries, the company itself outlines functioning in the US, India, Brazil, Ireland, Philippines, and the UK (“About us”, 2021). The phenomenon of political stability is one of the fundamental factors to consider when analyzing a company, as it serves as a catalyst to the development of either a beneficial or detrimental operational environment for a business. Thus, considering the countries UnitedHealth Group. Inc. operates in the most, the most politically stable states are the UK and Ireland, as their stability indexes are positive and constitute 0.47 and 0.98, respectively (World Bank, 2021). The other states indicate the following negative margins: -0.02 for the US, -0.42 for Brazil, -0.86 for India, and -0.79 for the Philippines (World Bank, 2021). Hence, it becomes evident that the company currently operates in politically unstable environments, which means that they are to take a proactive approach in anticipating economic and socio-political changes that may affect the trading patterns.
In the context of health care, it is also of paramount importance to dwell on the notion of trade and pricing regulations that interfere with the industry. Since the majority of the company’s income derives from monthly insurance premiums paid by UnitedHealthcare’s clients, it is necessary to establish the extent to which such public policies as the Affordable Care Act of 2010 influence the enterprise’s pricing and trade decisions. Hence, according to the World Health Organization (WHO, 2019), public regulations play a vital role in managing managed care providers, as health care costs, mostly incompatible with the population’s standards of living, are prioritized in the global political agenda.
Thus, for example, UnitedHealthcare is largely regulated by the provisions of the Patient Protection and Affordable Care Act (PPACA), which means that no less than 80% of the company’s income should be further spent on health care and quality improvement initiatives in order to secure better nationwide insurance coverage (US Centers for Medicare & Medicaid Services, n.d.). For its part, UnitedHealth Group, Inc. is capable of suggesting new policies and initiating public change through the bills initiated in terms of the American Exchange Legislative Committee (ALEC) that secures collaboration between the government and private sector. Finally, an important factor is the notion of taxation. As of 2020, UnitedHealth Group Inc. paid more than $4 billion of annual income tax (SEC, 2021). Currently, UnitedHealth Group Inc. operates in such heavily taxed markets as Ireland, the US, and India, but as a healthcare company that cooperates closely with public initiatives, the taxation rate did not exceed 1.5% of annual revenue. Hence, the political environment has a profound impact on the development of such businesses as United Healthcare, and currently, this impact remains rather questionable in terms of benefits for the enterprise.
Economic Factors
UnitedHealth Group, Inc. operates in markets with a mixed economy, which is characterized by private freedom affected by government regulations and centralized planning. As a result, the company does not have much freedom in terms of allocating resources and price estimations, limiting the economic freedom of the company. Apart from the UK, the target markets of the company have experienced a decrease in economic freedom due to the impact of the COVID-19 pandemic (“2021 index of economic freedom,” 2021). Another significant factor that contributes to the strategic development of UnitedHealth Group, Inc. is the unemployment rates across the states, as $55 billion of its revenue derives from a business branch called UnitedHealthcare Employment & Individual that focuses on employer-sponsored plans and benefits (SEC, 2021). As of 2020, the unemployment rates have been gradually decreasing in all countries in question except for the UK (“2021 index of economic freedom,” 2021). Hence, it is reasonable to assume that the increasing rates of employment in the countries contribute to the economic development of a company.
The empirical evidence also demonstrates that the increase in procurement of insurance premiums may positively impact the non-oil GDP rate of a state (Hemrit & Benlagha, 2019). Over the past year, one of the major economic constraints, the outbreak of the COVID-19 pandemic, has put at risk the potential development of the healthcare industry. According to Blumenthal et al. (2020), as well as Garett and Gangopadhyaya (2020), the unemployment crisis catalyzed by the COVID-19 pandemic initially resulted in a rapid decrease in the population covered by employer-sponsored health insurance. However, as a result, some health insurance enterprises, in fact, managed to practically double their profits by gaining premiums and not providing actual health care due to the lockdown and the postponement of elective surgeries (Holpuch, 2020). Hence, having considered the existing evidence, it may be concluded that the overall economic environment is currently beneficial for further UnitedHealth Group’s development.
Socio-Cultural Factors
Demographics play a vital role in the operation of such companies as UnitedHealthcare. Hence, one of the primary benefits of the company’s target market is high population rates, as UnitedHealth Group, Inc. operates in the US with 328 million people, India with a population of 1.4 billion, and Brazil with 211 million (“2021 index of economic freedom,” 2021). As a result, the company has the ability to cooperate both with the companies and individuals and has an exhaustive amount of target clientele. Another important social factor is the income rate in the state.
Considering the countries in question, the poverty rates in the state vary between 15% and 20%, and such an indicator is by no means beneficial for the company, as health insurance plans, although aimed at aiding people below the poverty threshold, do not benefit from such policies (World Population Review, 2021b). Finally, such a phenomenon as access to health care and its quality should be addressed. According to the 2020 Legatum Prosperity Index (World Population Review, 2021a), only the UK and the US are included in the top-twenty states with the best health care, with all other states being significantly behind. Such a pattern is not optimistic for the company, as lack of access to health care combined with the generally high prices for the service is likely to widen the existing socio-economic gap and negatively affect the managed care company.
Technological Factors
The notion of technology in health care, while being a strategic goal of providers for many years, has obtained an entirely new perspective. The rapid outbreak of COVID-19 has made it imperative to develop a digital tool to connect patients without real-life interactions. As far as managed care companies are concerned, the primary goal is to ensure that people have all-time and easy access to care management, healthcare options, the ability to manage their insurance plans.
Being a leading managed care company in the US, UnitedHealth Groups, Inc. obtained a technology-oriented subsidiary known as Optum. One of the most recent Optum developments is the Optum Perks app that allows clients to access discount prescriptions in a series of pharmaceutical companies (“Pharmacy services,” 2021). Moreover, when dealing with insurance directories, the company has now started using blockchain technology to encrypt and manage client data. Simultaneously, nation leaders tend to pay more attention to the investments in Research & Development due to the lifestyle and governance changes brought by the pandemic. Thus, while many companies and public leaders have now started investing in R&D, UnitedHealth Group Inc. manages to outperform its competitors by anticipating the future of managed care.
Conclusion
UnitedHealth Group, Inc. is a leading multinational managed care company that places emphasis on the secure processing of healthcare insurance plans for the population. Having considered the external factors that influence the company’s position in the market, it becomes evident that currently, even in the context of the pandemic, UnitedHealth Group Inc. finds itself at a significant competitive advantage in the market due to its geographical distribution, revenue, and close collaboration with the public sector, Undeniably, there are several pitfalls, including the economic growth and inequality in the majority of target states, but compared to previous years, much progress has been made.
References
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Clarke, C. (2019). Strategic planning in healthcare. In Textbook of Medical Administration and Leadership (pp. 31-46). Springer, Singapore.
Garrett, A. B., & Gangopadhyaya, A. (2020). Unemployment, health insurance, and the COVID-19 recession. Urban Institute. Web.
Hemrit, W., & Benlagha, N. (2020). Asymmetric impacts of insurance premiums on the non-oil GDP: Some new empirical evidence. Applied Economics, 52(12), 1363-1376. Web.
Holpuch, A. (2020). US health insurers doubled profits in second quarter amid pandemic. The Guardian. Web.
Pharmacy services. (2021). Optum. Web.
US Centers for Medicare & Medicaid Services. (n.d.). Health insurance rights & protections. Web.
US Security and Exchange Commission [SEC]. (2021). UnitedHealth Group [PDF document]. Web.
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World Population Review. (2021b). Poverty rate by country, 2021.