- UnitedHealth Group on Wednesday reported profit of $6.6 billion in the second quarter of the year, roughly double net income from same time last year, driven by a significantly lower medical loss ratio.
- Payer arm UnitedHealthcare, the largest commercial health insurer in the U.S., brought in $49.1 billion in revenue, up just 1% year over year. But its medical loss ratio, a marker of how much an insurer spends on patient care, plummeted to 70.2% in the quarter ended June 30, compared to 83.1% same time last year, due to temporary deferral of care amid the pandemic.
- The Minnetonka, Minnesota-based company beat Wall Street expectations for earnings but missed on revenue of $62.1 billion, up 2.5% year over year. UnitedHealth didn't change its full year guidance despite outperforming on earnings. "It seems the company is doing everything it can to reinvest that upside to members, providers and the community while also reserving for deferred care," SVB Leerink analysts wrote of the results.
Health companies are all facing major financial and operational challenges amid the pandemic, but the uncertainty is particularly acute for insurers, businesses that profit based off how well they can predict future health needs.
Growing COVID-19 cases in hotspots in the South and West — populous, high-membership states like Florida for UnitedHealth and managed care companies in general — suggest healthcare utilization likely won't return to normal in the back half of the year, complicating the outlook for U.S. payers once again.
UnitedHealth reported utilization was lowest from mid-March through April, began to recover in May and was almost back to normal by the end of the second quarter. Company executives said on a Wednesday morning earnings call they expect 90% of typical care volumes in June and moderately north of 100% in the second half of 2020 as patients seek previously delayed care.
MLR of 70.2% was significantly below Wall Street's consensus of 78.4%. UnitedHealth and analysts chalked that up to depressed utilization and a favorable $1.4 billion prior period reserve development, a measure looking at the difference between what a payer initially predicts for liabilities compared to the final amount of claims.
Primarily due to care deferrals, UnitedHealth reported the largest favorable intra-year reserve release in at least a decade, SVB Leerink analysts said.
UnitedHealthcare's earnings were significantly higher than expected due to the care delays. But the payer saw its commercial enrollment decline as millions of Americans were laid off their jobs and lost insurance, though member attrition was lower than the change in unemployment may have suggested, analysts said.
Employer and individual revenue was $12.9 billion, down from $14 billion same time last year, and membership dipped to 26.7 million people, down from 27 million people in the first quarter of 2020.
UnitedHealthcare's public sector and senior businesses (which include Medicare and Medicaid) were stronger, with revenue growing 7% year over year to $22.8 billion.
The company noted it received new Medicaid contracts in Kentucky and Indiana for 2021, but said the selling season was about 60 days behind where it would normally be at this point in the year.
"We expect roughly flat to a little bit up in terms of group wins and losses for 2021," Dirk McMahon, CEO of UnitedHealthcare, said.
Health services business Optum brought in $32.7 billion, up almost 17% year over year.
There were concerns by Wall Street about the performance of Optum's provider group, OptumHealth, due to the fee-for-service nature of the business.
Physician practices across the country have been particularly hard-hit by the pandemic. But the business gets about half its revenue from capitated payments to providers in OptumCare, a value-based ambulatory medical subsidiary, which benefited from low utilization.
Overall, OptumHealth's earnings of $841 billion grew 22% year over year.
UnitedHealth's operating costs hiked to 16.1% from 13.9% in the second quarter last year as the company purposely increased spending on the strong MLR results, SVB Leerink said in a note.
Revenue from investments plummeted more than 41% to just $342 million amid roiling markets. UnitedHealth said it had not laid off or furloughed any of its 325,000 employees.
On the call, Wichmann also touched on the potential for a Medicare-like public option proposal given presumptive Democratic presidential nominee Joe Biden's support for the insurance plan.
"We're not a strong supporter of these public option proposals," Wichmann said. "We believe there's a near-universal coverage system in America today."
A new study from Families USA estimates 5.4 million Americans have lost coverage amid the pandemic, on top of the roughly 30 million Americans already uninsured.
Correction: A previous version of this story had an incorrect figure for revenue.