- UnitedHealth Group beat Wall Street expectations for both earnings and revenue in fourth-quarter financial results released Wednesday, as care consumption and prescriptions returned to more normal levels despite fears of renewed deferrals as COVID-19 cases surge.
- The Minnetonka, Minnesota-based health giant reported quarterly revenue of $65.5 billion, up almost 8% year over year. Payer UnitedHealthcare brought in $50.3 billion in revenue, up more than 4% year over year, while UnitedHealth's pharmacy benefit management and care services group, Optum — a steady driver of growth for UnitedHealth — reported revenue of $35.9 billion, up more than 20% year over year.
- However, profit of $2.2 billion in the quarter was down 38% year over year. For the full year, UnitedHealth pulled in $15.4 billion in profit, up from $13.8 billion in 2019. The payer reaffirmed its full-year 2021 guidance on the results.
Health insurers have benefited financially from tailwinds from the COVID-19 pandemic, as people in the U.S. deferred non-emergency care for much of 2020, resulting in massive profits. Utilization slowly recovered over the year, but had yet to reach pre-COVID-19 levels in the third quarter.
That changed in the fourth, UnitedHealth reported.
In the quarter ended Dec. 31, overall care activity was just below the seasonal baseline in the first half but slightly exceeded normal levels in the latter, UnitedHealth CFO John Rex told investors on a call Wednesday. Outpatient activity began the quarter at pre-COVID-19 levels, but moderated somewhat in the second half of the quarter while inpatient activity increased modestly as COVID-19 incidence rose.
Deferred care is likely beginning to trickle back in, and could become a torrent as vaccine distribution ramps up. But it's unlikely the vaccine will reach enough people to provide herd immunity until well into 2021, if then, experts say, meaning the volatility that characterized 2020 for payers and providers is unlikely to let up this year.
UnitedHealth's heft and diversified book of businesses has insulated it from the worst of external headwinds. Despite the fraught economic environment, stock in the vertically integrated behemoth rose more than 21% last year.
And Wednesday's results were slightly better than the guidance UnitedHealth presented during its December investor day. Higher earnings in Optum drove much of the upside, but UnitedHealthcare also contributed, analysts said. However, net income declined as care patterns normalized and COVID-19 costs rose, along with rebates from the reinstatement of the health insurance tax.
UnitedHealth reported a medical cost ratio — a marker of how much a payer invests back into patient care — of just 79.1% for full-year 2020, down from 82.5% in 2019 due to widespread care deferrals amid the pandemic, and the reinstatement of the tax.
However, the MLR in the fourth quarter was 83.2%.
UnitedHealthcare continued to see a decline in commercial enrollment, which was down 0.5% in the fourth quarter compared to the third. However, that's slower than the declines in the second and third quarters this year, which oscillated between 1% and 1.6% — an encouraging sign for employment trends following months of recession and job loss, Jefferies analyst David Windley pointed out in a Wednesday.
However, early January membership results are "supportive of positive commercial growth in 2021," Rex said.
UnitedHealthcare, the nation's largest private payer, now covers 26.2 million commercial members.
The insurer has recently focused on growth in Medicare Advantage and Medicaid, two lucrative markets as people lose employer-sponsored insurance. MA enrollment grew 0.7% quarter over quarter and 8.3% year over year, while Medicaid enrollment grew 2.8% quarter over quarter and 12.2% year over year. UnitedHealthcare now covers 5.7 million MA lives and 6.6 million through Medicaid.
And MA offerings are off to an "excellent" start for 2021, with UnitedHealth CEO Dave Wichmann forecasting the year to be "one of our strongest years of growth" in the privately run Medicare plans. UnitedHealth expanded its MA footprint for 2021 by nearly 300 new counties, its biggest growth in five years, and has previously said it expects overall membership growth in 2021 to be led mostly by its MA business.
Optum reported earnings of $3.1 billion, due to higher revenue and a better margin than analysts expected, driven mostly by OptumInsight. The data analytics and consulting unit reported a 5% growth in backlog compared to 2019 to $20.2 billion, while PBM OptumRx's scripts were up on a quarter-over-quarter basis to $311 million, but down slightly year over year.
Optum, a consistent revenue driver, announced earlier this month plans to acquire tech company Change Healthcare for $7.8 billion in cash and $5 billion in debt.
For full-year 2020, UnitedHealth saw revenue of $257.1 billion, up 6% from 2019, led mostly by growth in Optum. Optum's full-year revenue was $136.3 billion. Its medical network, OptumHealth, treated 98 million people in 2020, compared to 96 million in 2019, and revenue per customer increased 29% year over year as more people joined value-based agreements and acuity of care provided rose.
UnitedHealthcare saw full-year revenue of $200.9 billion, also up slightly from 2019, as growth in community and senior programs offset commercial declines.
UnitedHealth reaffirmed 2021 guidance on Wednesday. The four-decade-old company expects adjusted earnings per share between $17.75 and $18.25.