A spike in COVID-19 costs cut into UnitedHealthcare's operating income during the final quarter of the year, although an enrollment increase for government-led plans and customer retention among its commercial business stabilized the insurer's 2020 business.
At the end of the fourth quarter on December 31, UnitedHealth Group's insurance subsidiary UnitedHealthcare reported an operating income of $396 million, a decline from $2.1 billion in 2019. The payer reported $50.3 billion in revenue in the fourth quarter, an increase over the $48.2 billion reported during the same period the year before. Its net operating income was $2.1 billion in the fourth quarter.
UnitedHealth Group Chief Financial Officer John Rex said that members' physician visits dipped as COVID-19 cases spiked at the end of the quarter, particularly among Medicare and Medicaid beneficiaries. COVID-19 treatments accounted for 11% of all care costs in the fourth quarter, compared to just 6% in the third quarter. The company counted 65,000 coronavirus patient admissions during the three-month period, with half of those patients admitted in December 2020. The insurer's medical-loss ratio was 83.2% during the fourth quarter.
UnitedHealthcare's rebates for deferred care will exceed the premium revenue the company pocketed, Rex said.
"Those actually will more than offset the magnitude of favorable reserve developed in the quarter," he said.
Full-year revenue at UnitedHealthcare reached $200.9 billion, up from $193.8 billion in 2019. The company's operating earnings reached $12.4 billion in 2020, up from $10.3 billion the year before.
UnitedHealthcare said growth in membership in its community and senior programs helped offset declines in its commercial business enrollment. Its Medicare Advantage and Medicaid plans saw 8% higher revenue and an additional 1.2 million people signing up for coverage.
While the pandemic impacted commercial revenue growth, Rex said customer retention remained strong. The company ended the year with 26.2 million commercial members, a 5.5% decline from 2019. Employers gravitated toward UnitedHealthcare's All Savers plan, which offers groups a refund if their members' health costs are lower than expected.
While commercial enrollment declined 0.5% quarter over quarter, that was a slower rate than earlier in the year, according to Jeffries analyst David Windley.
"That's an encouraging sign for employment trends," Windley wrote in a research note.
Going forward, UnitedHealthcare expects to add 1.5 million total members in 2021, with enrollment in government plans continuing to drive growth. The insurer's Medicare Advantage business has had a 13% compounded growth rate over the last five years, and expects to add 900,000 members to those rolls in 2021.
UnitedHealthcare expects to enter three new markets—Kentucky, Indiana and North Carolina—this year, which will drive growth in its Medicaid business. Managed-care providers could also grow as more states eye introducing long-term care for those beneficiaries, CEO David Wichmann said.
The company expects to add up to 300,000 Medicaid members in 2021, assuming that states will resume eligibility requirements at some point. Wichmann expects CMS' new rules around risk-sharing payments will benefit the company's finances by adding "predictability and visibility" for the plans.
As a whole, UnitedHealth Group expects to bring in $227 billion in revenue for 2021. The company expects COVID-19 testing, treatment, and other pandemic-related costs to reach $2 billion for the year, with about 75% of that coming from UnitedHealthcare's bottom line. UnitedHealth Group also expects consumers to continue to defer care in 2021, although not at the high levels seen at the start of COVID-19.
"I think seniors are increasingly more comfortable accessing care, which will obviously have an impact on diagnosis capture in 2021 and 2022," Wichmann said.
At its healthcare services subsidiary Optum, the company reported full-year operating earnings of $10 billion on revenue of $136.3 billion, up from $9.4 billion of operating income on revenue of $113 billion from 2019.
Optum plans to complete its $13 billion acquisition of Change Healthcare in the second quarter of 2021. The Nashville-based revenue cycle management and data analytics provider will join OptumInsight, the company's fastest-growing division.
In addition to helping drive the adoption of value-based payment models, Wichmann said Change Healthcare will help physicians provide in-home care and telehealth services to patients through real-time clinical insights. Company physicians conducted more than 2 million in-home visits in 2020.
"The need for in-home care will continue to grow well beyond the current environment," Wichmann said.
The company's OptumRx division beneftted from the 2.5 million members Blue Cross and Blue Shield of Michigan brought to its portfolio in January, Wichmann said. The number of prescriptions issued increased by 6 million from the quarter before to 331 million at the end of December 31, a 1% decline year over year. Still, the company said this reflects more typical script filling patterns.
OptumHealth likewise grew in 2020. The company served 98 million people at the end of the year, compared to 96 million a year ago. Revenue per consumer grew 29% year over year, driven by the number of people in value-based care arrangements and the increasing acuity of care services provided.
OptumCare kicked off 2021 on a positive note. The company started the year with more than 50,000 physicians across 1,400 clinics as part of its network. Over the year, the company expects to add another 10,000 doctors to its practice.
"The market seems to continue to gravitate to OptumCare-type model," Wichmann said. "The great sense of stability seems to resonate very well with physicians and also with our patients, where they get a better experience, outcomes and overall lower cost."
