Bloomberg News

UnitedHealth Uses Cheap Hearing Aids to Boost Medicare Sales

October 03, 2011

(Updates with closing shares in seventh paragraph.)

Oct. 3 (Bloomberg) -- UnitedHealth Group Inc., the largest U.S. health insurer by revenue, said it will sell a line of low- cost hearing aids to at least 36 million Americans with hearing loss in the first such program offered by an insurer.

The devices will be available to UnitedHealth customers through Medicare managed care and prescription drug plans for no out-of-pocket cost to some consumers and a co-pay of up to $649 for others depending on their plan, the company said in a statement. Hearing aids typically sell for from $2,000 to $4,000, according to the Minnetonka, Minnesota-based insurer.

The insurer provides Medicare benefits to almost 7 million consumers, making it the biggest provider under the U.S. health plan for the elderly and disabled. UnitedHealth shares fell as the overall market declined. IntriCon Corp., the hearing aid manufacturer that will supply the devices, soared 37 percent.

“Even before health reform, we heard across the board from customers that this was a benefit they wanted,” said Lisa Tseng, chief executive officer of Hi HealthInnovations, a newly formed UnitedHealth unit handling the sales and marketing of the hearing devices.

UnitedHealth is introducing the hearing aid program as Medicare recipients choose plans for 2012 coverage in a selling season expected to be competitive after the first of the baby- boom generation turned 65. The philosophy behind the decision resembles the company’s recently introduced diabetes testing and prevention effort, Tseng said.

Diabetes Program

That program seeks to help diabetics control their disease and those who are likely to develop the chronic condition stave it off through counseling, exercise and diet. UnitedHealth provides the effort in partnership with employers and YMCAs.

UnitedHealth spokesman Tyler Mason declined to comment on how much the new business may add in revenue or earnings or how it may influence the selection of managed care plans for 2012. “We didn’t project out the numbers,” Mason said in a telephone interview. “We’re addressing a pressing need for a sizable population in the U.S. and we envision a value-add to our current line of business.”

UnitedHealth’s stock fell $3.20, or 6.9 percent, to $42.92 at 4:15 p.m. in New York Stock Exchange composite trading as the Dow Jones Industrial Average declined 2.4 percent. The insurer’s shares have gained 19 percent this year. IntriCon rose $1.07, or 35 percent, to $4.14 in Nasdaq Stock Market composite trading.

IntriCon Products

IntriCon, an Arden Hills, Minnesota-based make of diagnostic equipment, also manufactures a wireless glucose sensor for Medtronic Inc. The company has a limited number of shareholders with 5.5 million shares outstanding, said Scott Longval, the chief financial officer. The biggest shareholder is Mark Gorder, the chief executive officer who holds 10 percent, Longval said.

Hearing loss is the third-most common chronic condition among older Americans, data from the National Center for Health Statistics show. The number affected is projected to increase 42 percent to 51 million by 2030 because the U.S. population is aging and environmental noise is increasing, according to a study from the University of Wisconsin-Madison School of Medicine and Public Health.

UnitedHealth, with 4.8 million in its Part D Medicare drug plans in 2011 according to Bloomberg data, may lose a few hundred thousand poorer Medicare beneficiaries because its plans are more expensive than rivals’ programs for 2012, Dave Shove, an analyst at Bank of Montreal in New York, said in a telephone interview. The company will charge a monthly average of $39.70 in 2012, up from $34.82 this year, UnitedHealth said.

Retail Sales

HI HealthInnovations also plans to offer the hearing aids for retail sale. The cost would be from $749 to $949, said Tseng, who is a physician. The UnitedHealth subsidiary will use the media and direct mail to advertise the products and is looking at marketing and distribution deals through large retail chains that sell drugs, such as Wal-Mart Stores Inc. in Bentonville, Arkansas, or Walgreen Co. in Deerfield, Illinois.

“We are only in discussions so far,” Tseng said in a telephone interview. The company will also make its computer test available to doctors at no charge, she said.

Hi HealthInnovations will offer four models of digital devices that are custom programmed to an individual’s hearing needs, Tseng said.

Seventy-five percent of the people who need hearing aids don’t have them in the U.S. largely because of cost, Tseng said. Yet, the loss of hearing directly affects quality of life, often socially isolating those who can’t hear and leading to other health problems such as depression and dementia, she said.

“UnitedHealth sees this as a way of meeting a need and cutting health-care costs,” Tseng said.

--Editors: Andrew Pollack, Chris Staiti

To contact the reporter on this story: Pat Wechsler in New York at pwechsler@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net


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