UnitedHealth nearly doubles Q2 profit during pandemic
UNITEDHEALTH GROUP reported the financial benefits of COVID-19 in the second quarter of 2020, with net income hitting $6.7 billion, nearly double what it recorded during the same period a year ago.
The nation’s largest insurer last week kicked off the first earnings season that reflects the economic impact of the pandemic on the industry.
Its experience confirmed what most experts had anticipated: Large, publicly traded insurers would substantially benefit from the pandemic even as most health systems and other providers bleed money due to the unprecedented deferral of elective procedures and routine care. UnitedHealthcare benefited across its health insurance and care delivery business segments.
“UnitedHealthcare and Optum have both experienced the effects of an unprecedented decline in healthcare services,”
UnitedHealth Group CEO David Wichmann told industry analysts in a conference call last week.
Those declines in healthcare services spelled massive returns for the company, despite UnitedHealth’s assurances that it has and would continue to return any “financial imbalances” resulting from deferred care. UnitedHealth has spent billions to prop up providers and lower premiums and copayments for its members amid the crisis. Like other insurers, it also committed to absorbing COVID-19 testing and treatment costs for many customers.
Its second-quarter earnings skyrocketed 97.8% over the same quarter a year ago. While its revenue increased just 2.5% to $62.1 billion, its operating costs dropped 5.3% to $52.9 billion as it spent less on medical care. Medical costs fell 11.5% to $34.7 billion.
UnitedHealth’s medical loss ratio plummeted to 70.2%, down from 83.1% a year ago. Under the Affordable Care Act, insurers are required to spend 80% to 85% on medical care or else rebate the difference to customers. Depending on how the rest of the year goes, UnitedHealth may owe large rebates in future years.
UnitedHealthcare—UnitedHealth’s insurance arm—drove most of the growth, recorded earnings from operations of $7 billion compared with $2.6 billion in the prior-year period.
John Rex, chief financial officer of UnitedHealth, explained that inpatient care fell to about 75% of its normal levels at its lowest point in April, while outpatient care and physician services fell to 60% of normal levels.
UnitedHealth’s fast-growing Optum business posted operating earnings of $2.2 billion, up 6.3%. OptumHealth, the care delivery unit that employs or contracts with 52,000 physicians, grew earnings from operations 22.2% to $841 million. Two-thirds of OptumHealth’s business is risk-based, while the other third is fee-for-service, so it wasn’t impacted as heavily by the drop
● in elective care.
THE MEDIAN IN-NETWORK commercial charge for COVID-19 hospitalizations ranged from $34,662 for the 23-to-30 age group to $45,683 for 51- to 60-year-olds, new data show.
Patients in the older group were most commonly hospitalized for COVID-19, accounting for nearly 30% of related hospitalizations, according to an analysis of commercial claims from January through May by not-forprofit research firm FAIR Health. The age distribution may be in flux, researchers said, pointing to recent reports indicating that the average age of new COVID-19 cases dropped by about 15 years.
“We are in the most scarred chapter of our country in terms of a public health crisis,” said Robin Gelburd, president of FAIR Health. “What you are seeing is payers trying to determine what type of processes they should adopt with respect to cost-sharing. All of this is happening in real time and we don’t know where the end is.”
The study mirrored Medicare claims data showing that chronic kidney disease and kidney failure were the most common comorbidities of hospitalized COVID-19 patients.
Those could be some of the underlying issues compounding COVID-19 for the older age group, leading to additional tests and procedures that account for the relatively higher charges, Gelburd noted. The charges were around twice as much as the negotiated rates between providers and insurers—including patients’ out-ofpocket costs—which aligns with the standard practice, she said.
The total charges to treat COVID-19 in hospitals are projected to range from at least $362 billion to as high as $1.45 trillion, FAIR Health estimates.
“The COVID-19 pandemic is scrambling norms we’d otherwise see in the data,” Gelburd said.
The analysis revealed that males were associated with a larger share (54%) of commercial claims. The office setting was the most common venue for initial diagnoses, except for patients age 61 and older, who were most commonly
diagnosed in an inpatient setting.
CMS ADMINISTRATOR Seema Verma mismanaged more than $6 million in communications contracts, according to HHS’ Office of Inspector General.
The watchdog issued a report July 16 detailing how Verma and other senior officials broke federal rules by giving a contractor, who previously worked for Verma in Indiana, far-reaching authority over CMS employees and power equal to a “CMS senior leader,” OIG said.
Verma defended the contracts last year, arguing that CMS needed to bring in outside expertise to supplement the agency’s busy staff. But OIG disagreed, saying that CMS could have filled up to 15 vacant positions instead of using the consultants.
HHS spokesperson Michael Caputo downplayed the findings of wrongdoing, arguing that they’re “based on arcane contracting rules that remain the subject of long-standing confusion and debate across the entire federal government.” Verma took issue with the report, too. “CMS contractor employees never had ultimate ‘direction or control’ of any government employees; instead, they were part of a collaborative effort to effectively communicate policy announcements, develop and propose recommendations for messaging, and craft cross-cutting agency communications strategies,” Verma wrote in a response letter.
OIG recommended HHS “provide training to political appointees and senior leaders related to proper contract administration” and take other steps to improve the agency’s management of
● federal contracts.