By Anna Wilde Mathews and Dave Sebastian
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (July 16, 2020).
UnitedHealth Group Inc. saw profits rise sharply because of
savings from surgeries, hospital stays and doctor visits canceled
amid the coronavirus pandemic, but the company said that health
care returned to near-normal levels in recent weeks.
The second-quarter results from UnitedHealth, parent of the
largest U.S. health insurer, UnitedHealthcare, offer one of the
broadest pictures so far of the pandemic's financial impact on the
health sector. The company's Optum arm also owns a sprawling
network of surgery centers, doctor practices and urgent-care
clinics.
UnitedHealth posted net income of $6.64 billion, or $6.91 a
share, compared with $3.29 billion, or $3.42 a share, in the same
period last year. Adjusted earnings were $7.12 a share. Analysts
polled by FactSet, who had expected a boost, still hadn't predicted
a financial windfall as big as the one UnitedHealth saw: They were
looking for earnings of $5.02 a share, or $5.28 a share on an
adjusted basis.
Across the country, elective surgeries paused for months this
spring as hospitals and other health-care providers braced for
surges of coronavirus patients. Many Americans also steered clear
of clinics and emergency rooms, fearing infection.
The insurers' payouts for coronavirus care so far fall well
short of the savings they have accrued from all of the forgone
procedures and other routine care.
"When you shut down the nation's whole medical infrastructure,
it's a massive decline in what UnitedHealthcare typically pays
for," said Gary Taylor, an analyst with JPMorgan Chase & Co.
"It's completely unprecedented, the magnitude of it."
UnitedHealth said that the use of health-care services began
returning to near-normal levels in June, a shift that continued
into July.
The company said it expected higher health-care costs in the
second half of the year, as people seek deferred care. UnitedHealth
also said testing and treatment expenses tied to Covid-19 would
continue into 2021.
"At this distance, the evolution of the pandemic, when, and to
what extent the economy will improve, are very much open
questions," said UnitedHealth Chief Executive David Wichmann in a
conference call with analysts and investors.
The company held steady its full-year earnings guidance of
$15.45 a share to $15.75 a share, or $16.25 a share to $16.55 a
share on an adjusted basis.
UnitedHealthcare's enrollment in commercial plans dropped, a
sign of how the economic downturn is affecting employers and
workers, who are experiencing furloughs and layoffs. The insurer
saw growing membership in its Medicaid and Medicare products.
The company posted revenue of $62.14 billion, up 2.5% from the
comparable quarter last year. Analysts were expecting $63.48
billion.
The clearest measure of how the slump in routine care lifted
UnitedHealth's results was the insurance unit's medical-loss ratio,
which represents the share of premiums paid out in claims.
UnitedHealthcare's MLR was 70.2%, compared with 83.1% a year
ago.
JPMorgan's Mr. Taylor said it was the lowest quarterly figure in
his two decades of data for the company. A UnitedHealth spokesman
said it was "historically low."
UnitedHealth said that at its lowest point in April, inpatient
care was running at around 75% of typical levels, while outpatient
and doctor services were down to around 60% of normal. Both types
of health care rose to near-normal levels in June, the company
said, with hospital inpatient care at nearly 95% of the usual
level.
The company said the trend has continued in recent days, despite
rapidly rising coronavirus cases in many parts of the country that
might derail hospitals' efforts to restore normal lines of
business, forcing them back into crisis mode.
"We don't expect to see a broad-based shutdown" of the
health-care system in the second half of the year, said Dirk
McMahon, chief executive of UnitedHealthcare. The company also said
that patients could have higher costs later in the year because
they had deferred needed treatments, or suffered from worsened
health because of delayed diagnoses.
Insurers have already come under pressure from regulators to
disgorge some of the savings to their customers. Companies
including UnitedHealth have pre-emptively offered premium credits
and other discounts, including waiving many out-of-pocket charges
to access care. UnitedHealth said it had paid out $1.5 billion in
such discounts.
"No one wants to see a health plan profit off of Covid," said
Dan Mendelson, an operating partner at private-equity firm Welsh,
Carson, Anderson & Stowe. "The health plans are very aware of
that."
UnitedHealth also said it expected to disburse another $1
billion in rebates required by the Affordable Care Act, and the
cost of the projected payment was already reflected in its
earnings. The law requires insurers to spend a certain share of
premiums -- 80% for individual and small-business plans and 85% for
large employers -- on health care.
If the spending ratio falls short, insurers owe refunds to
customers, but the payments tied to 2020 plans won't start flowing
until the fall of 2021.
Write to Anna Wilde Mathews at anna.mathews@wsj.com and Dave
Sebastian at dave.sebastian@wsj.com
(END) Dow Jones Newswires
July 16, 2020 02:47 ET (06:47 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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