- UnitedHealth beat forecasts on earnings for the fourth quarter of 2019, though revenues of $60.9 billion were slightly lower than Wall Street's expectations. The Minnetonka, Minnesota-based healthcare giant's stock traded up roughly 3% in late morning trading Wednesday.
- Health services segment Optum drove $29.8 billion in revenue in the quarter, up more than 8% year over year; and UnitedHealthcare, the nation's largest private payer, reported revenue of $48.3 billion, up 4.4%. The payer reported a medical loss ratio of 82.5% for the full year, up from 81.6% in 2018 as the impact of the health insurance tax deferral was partially offset by improved medical cost management.
- UnitedHealth executives cheered the repeal of the health insurance tax on a Wednesday call with investors.
A bipartisan spending package signed by President Donald Trump late last year repealed three taxes created to fund the Affordable Care Act, including a tax on the health insurance industry.
Payers are taking a victory lap over the so-called HIT's demise, with UnitedHealth CEO David Wichmann noting that repeal "removed the excessive volatility — more important than all that, is it affects the volatility of pricing in the marketplace as well. Hopefully we'll see that stabilize as we get into 2020 and 2021."
Last year was good to UnitedHealth. The massive healthcare company reported revenue of $242 billion and profit of $13.8 billion in the year, up 7% and 15.5% from 2018, respectively, due to growth across multiple businesses.
Profit grew 16.5% year over year in the fourth quarter alone to $3.5 billion, driven by earnings from operations as UnitedHealth continues to look for ways to capitalize off the overlaps between UnitedHealthcare and Optum.
UnitedHealthcare, which covers 49.2 million people, is seeing early signs of customer interest in new offerings meant to better align to the unique health and financial needs of patients. Jibing with that trend, the payer is selling plans, branded Harmony, in collaboration with OptumCare providers. The integrated care model drove up to 20% savings for fully insurer customers last year, according to the payer.
"You should expect more [in this vein] as we redouble our efforts to engage with consumers in impactful ways," UnitedHealthcare CEO Dirk McMahon said on the Wednesday morning call.
UnitedHealthcare's full year revenues of $198.3 billion increased 5.6%, mostly due to a growth in Medicare Advantage and commercial members. Despite the move toward value-based care, commercial beneficiaries in risk-based arrangements barely changed between 2018 and 2019, from 8.49 million people to 8.57 million.
Medicare & Retirement revenues grew more than 10% to $83.3 billion in 2019, primarily driven by 325,000 more people in MA plans. UnitedHealthcare now covers 5.3 million people in MA and expects to add another 700,000 in 2020.
The fourth quarter saw "our strongest Medicare Advantage results ever," Wichmann said. And despite changes to the program coming this year like increased flexibility in supplemental benefits and the introduction of end-stage renal disease patients, UnitedHealth execs maintain the company remains unbothered.
"We're not concerned with some of the unknown elements about the reimbursement models" for ESRD, McMahon said. UnitedHealthcare already serves 40,000 Medicare beneficiaries with ESRD and has had good results by focusing on prevention, he said — and social determinants of health are already a "key focus of the business."
"We look forward to doing more things in this area in 2021," Tim Noel, head of UnitedHealthcare's Medicare business, said.
UnitedHealthcare saw modest growth in its Medicaid business year over year and expects that to continue, said Heather Cianfrocco, CEO of Community & State. The payer, which won contracts in Washington, Texas and Nebraska last year, was also selected for North Carolina, but the state since paused its effort to shift its massive Medicaid program to managed care.
The payer also plans to "compete ferociously" for Kentucky's Medicaid business after the state's governor announced plans in December to cancel and rebid the contracts.
"We're pretty bullish about the opportunity that exists in Medicaid," McMahon said.
Optum, a steady driver of growth for UnitedHealth, reported full-year revenues of $113 billion, an 11.5% year-over-year growth, driven by double-digit growth across all Optum businesses.
OptumHealth, Optum's healthcare delivery arm, saw its revenue snowball almost 26% between 2018 and 2019, serving about 96 million people at year's end. The business has been working on building out its integrated care delivery network and expects 150,000 more patients to enter physician risk-managed programs in OptumCare, its central business, in 2020.
OptumInsight revenue grew more than 11% to $10 billion and pharmacy benefit manager OptumRx revenues grew 6.8% year over year to $74.3 billion. The PBM filled 1.34 billion scripts in 2019, consistent with the prior year despite the departure of a big client. The 2020 selling season was its strongest ever, Optum CEO Andrew Witty said.