Net income doubled, but no one is breaking out the champagne.
UnitedHealth Group today became the first
publicly traded life and health insurer to post earnings for the second
quarter, and its executives had to rush to explain that earnings for the next
few quarters could look a lot different.
The COVID-19 pandemic caused the Minnetonka,
Minnesota-based company’s net income to double, to close to $6 billion.
UnitedHealth offers pharmacy benefit manager
services, data services, health care services and other services as well as
health coverage.
COVID-19 forced many doctors and hospitals to
suspend or limit normal operations from about mid-March to the end of May.
That caused a sharp drop in volume at
UnitedHealth units that provide health care or health care support services on
a fee-for-service basis. The company was trying to protect its own workers by
having many continue to work from home.
But the COVID-19 quarantine efforts also led
to a sharp decrease in health care claim costs.
David Wichmann, UnitedHealth’s chief
executive officer, said, during a conference call the company held to go over
the results with securities analysts, that the results show the value of the
company’s efforts to create an adaptable enterprise.
“We’ve witnessed our people helping in ways
and advancing innovations and solutions at an unprecedented pace, scope and
scale,” Wichmann said.
UnitedHealth has waived all COVID-19-related
diagnostic and treatment costs, provided over $1.5 billion in emergency
assistance for consumers , provided $2 billion in accelerated payments for
health care providers, and penciled in plans to make $1 billion in premium
rebates, and it’s also helped state governments and employers set up about 500
COVID-19 testing sites, Wichmann said.
Earnings
UnitedHealth also made money.
The company is reporting $6.7 billion in net
income for the second quarter on $62 billion in revenue, up from $3.4 billion
in net income on $61 billion in revenue for the second quarter of 2019.
The company’s UnitedHealthcare health
insurance unit is reporting $7.1 billion in operating earnings for the quarter
on $49.1 billion in revenue, compared with $2.6 billion in operating earnings
on $48.6 billion in revenue for the year-earlier quarter.
Wichmann emphasized that the company expects
health care claims to rise, and UnitedHealth’s profit margin to narrow, as
use of care starts to return to normal levels.
Enrollment
The second quarter ended June 30.
UnitedHealth ended the quarter providing
or administering health coverage for about 48 million people, down from about
49 million people a year earlier.
Here’s what happened to the number of
people with key types of UnitedHealth health coverage between the end of the
second quarter of 2019 and the end of the latest quarter:
·
Risk-based: 8.1 million (down from 8.3 million)
·
Fee-based: 18.7 million (down from 19.1 million)
·
TOTAL
COMMERCIAL: 26.8 million (down
from 27.4 million)
·
Medicare
Advantage: 5.6 million (up from
5.2 million)
·
Medicaid: 6.2 million (down from 6.4 million)
·
Medicare
Supplement (Standardized): 4.45 million (down from 4.5 million)
·
TOTAL
PUBLIC AND SENIOR: 16.3 million
(up from 16 million)
·
TOTAL
DOMESTIC MEDICAL: 43
million (down from 43.5 million)
·
International: 5.4 million (down from 6.1 million)
·
WORLDWIDE
TOTAL : 48.4 million
(down from 49.5 million)
The Conference Call
Here are five things UnitedHealth executives
said about the quarter during the company’s earnings call.
1. Enrollment
At this point, Wichmann said, commercial
health plan enrollment has been reasonably stable.
Employers have been continuing health coverage
for many furloughed workers, Wichmann said.
When stimulus efforts end, the pandemic could
have a bigger effect on employer health plan enrollment, Wichmann said.
2. The Cost of Care
UnitedHealth executives noted that enrollees’
use of health care increased to about 95% of normal levels in June, from just
60% in April.
At this point, executives said, they worry
that pent-up demand for care, and health problems caused or aggravated delays
in use of preventive and routine care, could lead to a big increase in claim
costs in the second half of the year.
3. Rebates
UnitedHealth is already planning to pay out at
least $1 billion in premium rebates to its customers for 2020 coverage.
Wichmann said UnitedHealth will find a way to respond,
through rebates or other mechanisms, if claim costs run unusually low
throughout all of 2020.
UnitedHealth is already using waivers of the
usual cost-sharing rules and some other rules to help the enrollees, and it’s
already talking with state insurance regulators about how to return excess
premium revenue, Wichmann said.
“Obviously it’s a lot easier to give money
back than it is to ask for new, and so they’ve been very receptive and very
collaborative and extremely appreciative that we were as proactive as we were
and as early as we were in providing needed relief to our commercial members,
as well as the actions that we took on the Medicare front,” Wichmann said.
4. 2021
Bill Golden, the head of the company’s
commercial employer and individual health coverage unit, said the company is
factoring a rebound in care use and costs into 2021 prices, but he also said
that, “Our clients are really expecting and appreciating consistent and stable
pricing from us.”
Dirk Mahon, head of UnitedHealth’s UnitedHealthcare
health insurance unit, said the national accounts health coverage selling
season is about 60 days behind where it would normally be in mid-July.
The company expects to have about as many
national health plan accounts in 2021 as it has this year, but, “really, the
tale is going to be told with respect to national accounts as to what attrition
occurs throughout the remainder of the year,” Mahon said.
Wichmann said UnitedHealth is not yet ready to
talk about what earnings might be like in 2021, or, in detail, about how
individual company units are performing now.
“Given the volatility of the market as it
stands right now, and, more, the near-term focus that we have in making sure
that we’re serving our patients, members, customers, and then keeping our
people safe, including 120,000 clinical resources out on the front line of
care, we’re just not really in a position to talk about 2021,” Wichmann said.
UnitedHealth might be in a better position to
talk about 2021 in about three months, Wichmann said.
Wichmann added that UnitedHealth is not making
predictions about the business units’ future performance anymore “because there
is nothing normal about how any of them are performing at this stage.”
“Collectively, they’re doing a great job and
they’re right on expectations, and they’re right on the expectations that
informed the guidance that we gave you back in December, maybe a little bit
ahead,” Wichmann said. “So they’re performing really well, I just don’t think
at this time it’s the right time for us to be thinking about where we’ll land
in 2021 on margins.”
5. Health Care Reform
Now
Wichmann, UnitedHealth’s CEO, noted that a
UnitedHealth unit will be participating in Washington state’s new public option
program and sees that as an interesting test of how the company’s plans will
perform in that kind of arrangement.
But Wichmann said UnitedHealth believes many
public option proposals would disrupt current U.S. health care delivery
arrangements too much to be popular with typical consumers.
“We believe there’s a near universal coverage
system already in America today,” Wichmann said. “It’s obviously not complete
and it has some gaps, but we believe those gaps can be closed and think that
consumers much prefer that we leverage the existing commercial Medicare and
Medicaid markets to provide the types of coverage options and coverages that
are necessary for America.”
One way to improve Americans’ access to health
coverage, and health care, would be to adopt the Affordable Care Act Medicaid
expansion program in states that have not adopted it, Wichmann said.
Another good approach might be to move to an
automatic enrollment system for Medicaid and similar programs, Wichmann said.
“We see a lot of the uninsured are actually
folks that have an affordable coverage option available to them, but they don’t
necessarily enroll,” Wichmann said.
About 8.5 million of the uninsured people are
people who are already eligible for Medicaid, Wichmann said.
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