UnitedHealth Group Incorporated UNH

The business

UnitedHealth is two companies. UnitedHealthcare sells health insurance and collects premiums, mostly through employers, Medicare Advantage and state Medicaid contracts. Optum is everything else: physician practices it owns, the pharmacy benefit manager that negotiates drug prices, and a data and technology arm. Optum is roughly 59% of revenue.

The whole business turns on one ratio. Premiums come in at a price fixed a year ahead, and medical costs go out at whatever they turn out to be. The gap is the profit.