UnitedHealth: Health Care Spending Returned to Normal in 4Q

by Leslie Small

In the fourth quarter of 2020, health care spending patterns experienced by the country's largest health insurer "returned to seasonal baselines" even as COVID-19 cases surged all over the U.S.

During a Jan. 20 conference call, UnitedHealth Group Chief Financial Officer John Rex explained that two opposing forces caused spending to align with historical levels. While the amount that UnitedHealth spent on COVID-19-related care increased compared with the third quarter, overall outpatient activity dipped below baseline as the end of the year drew closer, reflecting the fact that more people started deferring routine and elective care as coronavirus cases rose.

Generally speaking, "the cadence of non-COVID and COVID costs will fluctuate, but tend to offset," observed Jefferies analysts David Windley and David Styblo in a Jan. 20 note.

Direct COVID-related care comprised about 11% of UnitedHealth's total health care spending in the fourth quarter, up from 6% in the third quarter, Rex said.

Rex also noted that "we concluded 2020 with commercial membership about 100,000 people ahead of the outlook we provided at our investor conference." In fact, the firm's commercial enrollment "is down only 3% since Q1 despite the spike in unemployment," noted Evercore ISI analyst Michael Newshel.

UnitedHealth was much more bullish about its government-sponsored lines of business. "The UnitedHealthcare Medicare Advantage offerings are off to an excellent start" this year, UnitedHealth Group CEO David Wichmann said, adding that "2021 will be one of our strongest years of growth, now expected to approach 900,000 more people served across individual and group Medicare Advantage and dual Special Needs Plans."

Wichmann also expressed optimism about the firm's Medicaid managed care business, noting that UnitedHealth entered three new states this year. "New business opportunities are substantial, with momentum toward managed care adoption by states and RFP [request for proposal] activity accelerating this year and next," he said.

However, Tim Spilker, CEO of UnitedHealthcare Community & State segment, acknowledged during the call that cash-poor states are continuing to leverage risk corridors and medical loss ratio structures to claw back excess profits from MCOs.

Overall in the quarter, UnitedHealth reported an adjusted earnings per share of $2.52, a figure that beat the Wall Street consensus estimate of $2.41 but represented a decline from the $3.60 per share that the company earned in the fourth quarter of 2019.

From Health Plan Weekly