- Double-digit percentage growth in UnitedHealth's Medicare and retirement insurance, OptumRx and OptumHealth spurred the insurance giant to 8% year-over-year revenue growth in the second quarter of 2019. Revenues grew $4.5 billion to $60.6 billion for the three months ended June 30.
- The deferral of the Affordable Care Act's health insurance tax to 2020 drove revenue growth that in turn improved UnitedHealth's operating cost ratio and strengthened the medical cost ratio, a marker of how much the payer is investing in patient care. UnitedHealthcare, the payer arm of the Minnetonka, Minnesota-based company, also saw earnings from operations grow by 12.1% to $2.6 billion, with 6% revenue growth.
- UnitedHealth's earnings per share and revenue surpassed Wall Street expectations and the company summarily raised its guidance for the rest of the year, kicking off off managed care organization earnings season with a "solid start," according to Jefferies analysts.
UnitedHealth executives said they are focusing on consumer engagement, actionable health information and analysis and the shift to value-based care, they told investors Thursday morning. The company's solid performance in the first half of the year suggests it could be moving in the right direction.
Earnings from operations grew 12.8%, or $540 million year over year to $4.7 billion. Cash flow from operations were $5.9 billion in the quarter, chalking up the total at $9.1 billion year to date — three times net income.
Operating cost ratio, or UnitedHealth's operating expenses divided by revenues, improved from the second quarter of last year, landing at 13.9%. The company credited improved productivity, operating cost management and deferral of the health insurance tax for the jump.
That annual health insurance tax on payers selling comprehensive plans was designed to help fund the ACA exchanges. Congress approved a one-year delay on collecting the tax for 2019 and the House voted this week to scrap it entirely.
Despite the House vote, the company is "measured and disciplined in how [it] went to market in 2019 in terms of thinking about this tax returning," UnitedHealthcare CEO Dirk McMahon said on the earnings call with investors and reporters.
Insurers are expected to increase premiums by roughly 2% to recoup the cost of the tax as they face an estimated $16 billion fee next year, according to consultancy Oliver Wyman.
UnitedHealthcare's 6% revenue jump brought it to $48.6 billion in the quarter, up $2.7 billion from same time last year, though down slightly from last quarter's revenues of $48.9 billion.
The bump was largely due to its Medicare and retirement business, which saw year-over-year second quarter revenue growth of 10.6%. Privately-run Medicare Advantage plans continued to be a boon for the insurer, adding 540,000 more covered lives in the program (including those dually eligible for Medicare and Medicaid and other social programs) year over year.
"We see significant macro revenue growth in these categories for years to come," McMahon said. "As such, we'll continue to invest in many ways," such as providing all dual eligible beneficiaries with a personal care coordinator starting next year.
UnitedHealth's health services division, Optum, reported revenues of $28 billion in the second quarter. That's a $3.3 billion spike, or 13.4%, year over year. That revenue growth, along with stable operating margin performance, advanced earnings from operations 13.8% to $2.1 billion, up from $1.8 billion last year.
OptumRx, UnitedHealth's pharmacy benefit manager, saw revenue growth of $2 billion in the quarter to almost $19 billion. That's up $2 billion, or 12%, year over year, driven by market share gains and diversified offerings including a higher mix of specialty pharmacy care services. The PBM filled 343 scripts in the quarter, more than a 3% growth from a year ago.
Spurred by diverse growth across care delivery, behavioral health services and complex care management, UnitedHealth's patient care provider OptumHealth reported revenues advanced $1.2 billion, or 20.3%, year over year to $7.1 billion. Value-based care arrangements increased, contributing to average revenue per consumer jumping 17% year over year.
Data analytics and consulting arm OptumInsights reported 7% year-over-year revenue growth to $2.3 billion. The division is fresh off an announcement this week that it is taking over the information technology and back office functions of John Muir Health, a major independent health system in the San Francisco bay area.
The partnership to assume all nonclinical functions of the California health provider is novel and won't be the first, Eric Murphy, CEO of OptumInsight, teased Thursday.
"Our market knowledge suggests that several hundred regional health systems are interested," he said on the call. "We're already in talks with several and look forward to establishing similar partnerships across the industry."
UnitedHealth's acquisitions over the year, including medical group DaVita and online patient sharing network PatientsLikeMe, were immaterial to the company's second quarter performance, executives said.
UnitedHealth CEO David Wichmann appeared Thursday morning to have learned a lesson from last quarter, when his harsh words about Medicare for All on the earnings call sent payer and provider stocks tumbling.
When asked about the myriad proposals floated by the Trump administration, including the executive order to increase pricing transparency and the now dead-in-the-water rebate rule, Wichmann remained tight-lipped.
"There's a lot of policies and proposals and proposed legislation going on today, and it's in part linked to the political campaigns," Wichmann said. "For this purpose, we would probably restrict our commentary to general themes."
UnitedHealth's employer plans and those in the individual marketplace chugged along in the quarter, showing growth in commercially covered lives by 615,000 people and revenues by $324 million year over year to $14 billion.
McMahon highlighted UnitedHealthcare's population health management partnership with Colorado's Centura Health as an example of the payer's commitment to diversifying and expanding its commercial business. The venture has achieved price points 20% lower than the payer's broad access offerings since its inception in 2014, McMahon said.
UnitedHealthcare also served more people with high acuity needs in the quarter, with revenue from its Community and State business rising 4.1% to $11.2 billion, though second quarter membership declined by 350,000 people.
UnitedHealth increased its outlook based on its results from the first half of the year, bumping expected full year net earnings to $13.95 to $14.15 per share (adjusted $14.70 to $14.90 per share).
The healthcare giant's stock remained stable following the earnings release.