UnitedHealth Group enters senior fitness market race

Minnetonka-based UnitedHealth Group is introducing a senior fitness program in 11 states that analysts said will compete with the popular "SilverSneakers" program that's ubiquitous in Medicare health plans.

Called Optum Fitness Advantage, the program is being introduced as part of certain Medicare Advantage plans sold by UnitedHealthcare, which is the nation's largest health insurer.

The announcement Monday apparently drove a sell-off in shares of Tennessee-based Tivity Health Inc., the company that operates SilverSneakers and saw its stock drop more than 34 percent.

"With this announcement, a lot of people are worried that eventually United might try to in-source this, or convert all their members to this Optum fitness program instead of SilverSneakers," said Mohan Naidu, an analyst with Oppenheimer. "Of course, they're not doing that now. ... It just appears that it's a first test."

David Styblo, an analyst with Jefferies, wrote Monday in a note to investors: "It seems UnitedHealth could be testing its Fitness Advantage offering to see how well it competes with [Tivity Health's] SilverSneakers over the next three years. If successful, UnitedHealth could choose to scale down or terminate its contract."

Tivity Health did not respond to e-mails seeking comment. UnitedHealth Group includes the UnitedHealthcare health insurance division, plus a fast-growing unit for health care services called Optum.

In Minnesota, UnitedHealthcare doesn't currently sell Medicare Advantage plans, so the news won't impact subscribers here. The new Optum program gives Medicare Advantage customers in states like Arizona and Texas access to a large network of participating fitness centers.

"Plan participants will have access to the same services, privileges, classes and programs as the fitness centers' standard members, including waiver of all enrollment fees," UnitedHealthcare said Monday in a statement announcing the program.

The Optum network will include a number of fitness centers including Chanhassen-based Life Time and Woodbury-based Anytime Fitness, where officials expect the new program will account for about 68,000 members. The company didn't specify how many of the members would be new to Anytime Fitness, as opposed to current UnitedHealthcare subscribers who access the gym via other fitness programs for seniors.

Senior fitness programs don't own health clubs, but negotiate contracts to create a network of participating gyms, said Naidu, the analyst with Oppenheimer. Health plans and employer groups buy access to the network of gyms for their subscribers.

The SilverSneakers program has about 57 percent of the market, Naidu estimated, followed by a competing program called Silver & Fit. Seniors are very familiar with the SilverSneakers name, Naidu said, so insurers want a connection with the brand to draw enrollees.

He said SilverSneakers remains the fitness provider for UnitedHealthcare's Medicare Advantage plans sold to employer groups, as well as the Medicare health plans for individuals in states other than the 11 included in the new Optum program.

"In my view, this is clearly an experiment by United to test if this could work, and not lose a lot of membership for not having SilverSneakers," Naidu said.

Considering that UnitedHealthcare accounts for an estimated 15 percent or so of revenue at Tivity Health, the stock decline Monday was an overreaction, said Styblo, the Jeffries analyst. The pullback assumes "more than a worst-case scenario for 2021," Styblo wrote in his research note, since Tivity Health renewed most of its business with UnitedHealth Group through 2020.

In the third quarter, Tivity Health posted net income from continuing operations of $19.9 million on $137.7 million in revenue. During the same time period, UnitedHealth Group saw earnings of $2.49 billion on $50.32 billion in revenue.

UnitedHealth Group piloted the Optum fitness program for Medicare enrollees in two states during 2017. This fall, the company announced it plans to start selling Medicare Advantage plans in Minnesota in 2019.

Christopher Snowbeck • 612-673-4744

Twitter: @chrissnowbeck