UnitedHealth's building (Credit: Jim Mone/AP)

UnitedHealth Group Inc. should produce solid earnings this year, but the company’s main focus is on overcoming the COVID-19 pandemic, company executives said Wednesday.

David Wichmann, the company’s chief executive officer, told securities analysts, during a conference call, that the effort to fight COVID-19 is deeply personal to everyone at UnitedHealth.

UnitedHealth is now a major health care services provider as well as health insurer.

“We are committed to applying the full capacity of our enterprise to serve, not just our patients, members, and customers, but also the hundreds of millions of people impacted across the nation and around the world,” Wichmann said.

One concern, he said, is that COVID-19-related disruption could end up benefiting United Health at the expense of doctors, hospitals and customers.

(Related: What If COVID-19 Lowers Health Claims?)

Because the current situation is so unusual, UnitedHealth is not sure what its insurance claims, health care revenue, and earnings will be like, Wichmann and other executives said.

The Affordable Care Act (ACA) already includes a minimum medical loss ratio (MLR) provision. The minimum MLR provision requires health insurers to provide rebates if health care spending amounts to less than 85% of revenue for large-group health coverage, or less than 80% of revenue for individual or small-group health overage.

Because health care providers and patients are putting off as much care as possible, both to conserve health care resources and to reduce the risk that patients and providers will infect each other with the virus that causes COVID-19, it’s possible that reductions in health insurance claims will outweigh any COVID-19-related claim costs from now through June, Wichmann said.

If health claim reductions are really bigger than the added COVID-19-related costs, “not only would there be normal MLR rebate situations, but we may very well find ourselves in a position where we can provide some additional premium relief to those clients,” Wichmann said. “It remains to be seen whether or not we are able to do so, and to what extent. But it is something that we’re deeply committed to doing.”

Wichmann also talked about worries about potential “financial imbalances” at several other points during the call.

“While there is still much to understand, we can be very clear with you today that we are committed to ensuring that any financial imbalances which arise from this situation will be reconciled proactively and addressed fairly for all those we serve,” Wichmann said.

UnitedHealth has already paid about $2 billion to health care providers early, to help the providers cope with the effects of COVID-19 on their operations, Wichmann said.

UnitedHealth held the conference call to go over earnings for the first quarter.

Resources

  • A link to a recording of UnitedHealth’s earnings call is available here.
  • Links to UnitedHealth earnings documents are available here.
  • An article about UnitedHealth’s earnings for the fourth quarter of 2019 is available here.

The quarter ended March 31.

UnitedHealth executives noted that, because COVID-19 began to have much more of an effect in March, and major government rule changes took effect in March, the pandemic has not yet much effect on its earnings.

The Earnings

UnitedHealth is reporting $3.5 billion in net income for the first quarter on $64 billion in revenue, compared with $3.6 billion in net income on $60 billion in revenue for the first quarter of 2019.

The UnitedHealthcare health insurance unit is reporting $2.9 billion in operating earnings on $51 billion in revenue, compared with $3 billion in operating earnings on $49 billion in revenue for the year-earlier quarter.

The company is providing or administering health coverage for 49 million people, down from 50 million people a year earlier.

Here’s what happened to the number of people with key types of UnitedHealth health coverage:

  • Risk-based: 8.2 million (down from 8.3 million)
  • Fee-based: 19.2 million (flat)
  • Medicare Advantage: 5.6 million ( up from 5.2 million)
  • Medicaid: 5.9 million (down from 6.4 million)
  • Medicare Supplement (Standardized): 4.4 million (down from 4.5 million)
  • International: 5.6 million (down from 6.1 million)

The COVID-19 Response

Wichmann said health care providers at UnitedHealth’s Optum unit have provided care for about 10,000 of the 644,000 U.S. residents who’ve had COVID-19.

The Optum unit is running about 400 COVID-19 test sites, and it’s helping New Jersey set up a field hospital, Wichmann said.

Optum’s own health care providers had trouble getting personal protective equipment, he said.

“We are resolved and committed to making sure that not only our health workforce, but the health workforce broadly, stays protected,” he said.

UnitedHealth has been working on getting more protective equipment, and also on testing that can help reduce the need for protective equipment, he said.

The company offered a special enrollment period for all people who wanted to get coverage in time to cope with COVID-19 risk, and “tens of thousands” of people took UnitedHealth up on that offer, Wichmann said.

UnitedHealth has also offered payment extension arrangements for employers facing financial problems.

The percentage of commercial premiums affected by extensions has increased to 3% this month, from a typical level of about 0.4% of the premium base, according to Dirk McMahon, the chief executive officer of the UnitedHealthcare unit.

The Individual Market

UnitedHealth has moved in and out of the ACA individual major medical market since 2014, when the ACA public health insurance exchange program came to life.

The company began looking at participating in more ACA exchanges before the COVID-19 crisis came along, McMahon said.

“We’re still in the process of going through market-by-market, evaluating the relative efficiency of our network, our ability to compete, and states where we would like to extend Medicaid,” he said.

McMahon said UnitedHealth will probably have a better idea of what it will do about the individual major medical market in July, when it releases its second-quarter earnings.

— Read CNO CEO Writes to Shareholders From His Home Office, on ThinkAdvisor.

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