UnitedHealth Group announced Tuesday morning first-quarter revenues grew $6.5 billion, or 13.3%, year-over-year to $55.2 billion, in part on membership growth and higher margins in its Optum services unit.
Each of the insurer's business line earnings increased by double digits, and overall earnings from operations increased $640 million, or nearly 19%, to $4.1 billion.
Overall membership rose to close to 48.9 million medical members, nearly 2.2 million more than the fourth quarter of 2017 and nearly 2.4 million more than a year ago.
The nation’s largest private payer said gains in public/senior plans and global customers more than offset losing commercial group and individual market members in the first quarter.
UnitedHealthcare gained 375,000 more elderly members in the quarter, including 330,000 in Medicare Advantage. The company has the largest MA membership and it grew nearly 11% year-over-year.
Brian Thompson, CEO of UnitedHealthcare’s Medicare & Retirement, said the company expects a long-term MA growth rate of about 8%, including for 2019.
The Minnetonka, MN-based company also gained 200,000 international members during the quarter. Its UnitedHealthcare Global business now serves 6.1 million people. Steve Nelson, UnitedHealthcare CEO, said that number includes members brought in through its BanMedica purchase. The deal allowed UnitedHealthcare to expand into the South American market for healthcare benefits and delivery.
However, UnitedHealthcare covered 195,000 fewer people in commercial group plans, “reflecting employers shifting their retirees from self-funded offerings to group Medicare Advantage plans,” according to the company.
Nelson said UnitedHealth expected that lower trend in the quarter, but predicted membership gains in the commercial group in the coming year.
First-quarter net earnings were $2.87 per share, which grew almost 29% year-over-year.
The company boosted its outlook for 2018 net earnings to a range of $11.70 to $11.95 per share and adjusted net earnings of $12.40 to $12.65 per share.
The slight dip in UnitedHealth's Medicaid population during the first quarter compared to the previous quarter was connected to withdrawing from the Delaware market. Overall, the company was still almost 500,000 members better year-over-year in the Medicaid population.
Its total public and senior member population increased to 15.9 million members, where more than 1 million members were added year-over-year.
Meanwhile, its Optum unit, which includes pharmacy, data and delivery services, saw revenue increase by 11.1%, or $2.4 billion to $23.6 billion in the first quarter.
Drilling down further, OptumHealth’s revenues increased $1 billion, or almost 22%, to $5.8 billion. The company said the improvement was “driven by growth in care delivery and behavioral, digital consumer engagement and health financial services.”
OptumHealth served 91 million people, an increase by 9 million people, or 11%, over the past year.
Congress earlier this year delayed a health insurance tax that is part of the Affordable Care Act. UnitedHealth said that move had an impact on the payer’s medical loss ratio, a measure of how much is spent on medical care as opposed to administrative and other costs.
The company said the tax was the "primary driver" of the 100 basis point year-over-year decrease in the consolidated medical care ratio to 81.4%.
Both David Wichmann, CEO of UnitedHealth Group, and Nelson trumpeted the move from fee-for-service to a value-based system.
Wichmann on the call predicted that within a decade half of Americans will get care from a physician with a value-based contract. Nelson said more than 15 million members get care through a physician in a “performance-based integrated care design.” The result has been higher quality, lower emergency room visits and lower costs, Nelson said.