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UnitedHealth reiterates MA growth expectations for 2022 as profits eclipse $4B

Dive Brief:

  • UnitedHealth reiterated its 2022 enrollment targets for Medicare Advantage on Wednesday, easing recent concerns that rising competition could hamstring future growth in the fruitful market.
  • The forecast was released along with its fourth quarter and full-year 2021 results. The Minnetonka, Minnesota-based healthcare behemoth also reported no serious change in utilization trends despite skyrocketing COVID-19 case counts due to the highly infectious omicron variant.
  • UnitedHealth beat Wall Street expectations on both earnings and revenue in the fourth quarter, with revenue of $73.7 billion, up 13% year over year, thanks in part to the outsized growth of its health services business Optum. Net earnings of $4.2 billion were almost double the $2.4 billion in profit brought in at the same time last year.

Dive Insight:

2021 was a very good year for managed care companies, amid record enrollment in plans through the exchanges set up by the Affordable Care Act, the growing popularity of privately managed Medicare Advantage plans and states pausing Medicaid redeterminations during the COVID-19 public health emergency. However, it’s unclear whether payers will enjoy a similarly positive environment in 2022, with their fate depending largely on the impact of COVID-19.

UnitedHealth, the largest private health insurer and viewed as an industry bellwether for the earnings season, set a generally optimistic tone for its peers on Wednesday with the release of its financial resultsUnitedHealth’s payer arm, UnitedHealthcare, reported revenue up 12% year over year to $56.4 billion.

Despite the emergence of the omicron variant in the fourth quarter, pushing the country’s daily case reports to record levels, UnitedHealth said utilization trends among its members were similar to the third quarter.

That was reflected in its medical loss ratio, a marker of how much it’s spending on patient care. UnitedHealth reported an MLR of 83.7% in the quarter, only slightly above the past quarter’s 83%.

Its commercial segment was largely at baseline performance in the quarter, while Medicare and Medicaid were slightly below, UnitedHealthcare CEO Brian Thompson told investors on a Wednesday morning call. Omicron is contributing to some differences and changes in severity, but overall the payer is seeing a similar trend to other variants, with higher then anticipated increases in testing and related costs offset by care deferral, according to Thompson.

That’s also reflected in the early days of 2022. In the first few weeks of January, UnitedHealth saw slowing primary care visits and elective and procedural volumes, CFO John Rex said. Over the past several weeks, primary care visits have declined about 10%, while specialty visits have fallen even more, Rex told investors.

Omicron is driving down non-emergent care, but appears to be causing milder disease than other COVID-19 variants.

Inpatient hospitalization levels in recent weeks are similar to those seen in January 2021, even as national case rates are four times higher, CFO John Rex said. For members requiring inpatient care, severity is apparently lower as they have shorter lengths of stay, according to the executive.

Overall, UnitedHealthcare saw its membership snowball in 2021, adding 2.2 million total people to its rolls. Along with expansion in the broader Medicaid market, that growth was spearheaded by growth in both individual and group MA and dual special needs plans, management said.

The payer covered 50.6 million medical members as of Dec. 31, with MA accounting for 6.5 million members at year’s end, a growth of 780,000 over the past year.

Competition in MA is ramping up as the program continues to swell, currently capturing about 44% of all Medicare beneficiaries. Rivals including Humana, Cigna and CVS Health-owned Aetna all entered into new markets for 2022, with the established payer giants facing off against new upstarts like Clover Health and Oscar Health to capture new members.

Despite dismal projections from some of its peers about slowing MA enrollment, UnitedHealth’s slice of the lucrative market continues to grow. Over the past five years the payer’s MA enrollment has had an average annual growth rate of 13%.

“Big picture, really positive,” Witty told investors about the insurer’s expectations for the space.

UnitedHealthcare has the most MA members of any other U.S. insurer. And currently, it expects to add another 600,000 to 650,000 new MA members in 2022, with about three-fourths in individual and group plans and the remainder in dual special needs plans, Rex said.

“Given recent commentary from peers, this should be received with some relief from investors,” Jefferies analyst David Windley wrote in a note on the results.

Recent concerns over potentially flagging Medicare growth caused the stock of managed care operators to sag earlier this month, following sustained gains over the past two years as the pandemic drove historic profits for payers. Humana, for one, slashed its 2022 MA forecast on Jan. 6, citing “very aggressive” competition, sending its shares tumbling.

UnitedHealth also remains bullish on Medicaid, despite expectations that states would resume eligibility redeterminations some time this year.

The payer expects “modest net attrition” from its Medicaid rolls if and when those resume, but “we’re confident we’ll pick up our fair share as people transition from Medicaid to other types of coverage,” Tim Spilker, CEO of UnitedHealthcare’s community and state business, said.

Optum’s revenue grew 14% year over year to $41.1 billion in the quarter. Growth in the health services segment was spurred by an increase in people served under value-based care arrangements, and the ongoing buildout of care delivery capabilities, including at-home and virtual care offerings, management said.

Value-based care delivery is a key growth area for UnitedHealth, as the company continues to work on linking its behavioral, home, ambulatory and virtual capabilities, Witty said. 

Optum Health will become accountable for 500,000 new patients in 2022, COO Dirk McMahon said, “a distinctive competency of our enterprise which we can now increasingly apply at scale.” The company spent roughly $100 million in 2021 to prepare, spending on things like staff and physician training, technology and data enhancement and network coordination.

Overall, UnitedHealth brought in total revenue of $287.6 billion in 2021, up 12% from 2020.

The health giant also reiterated its 2022 expectations released in November, expecting to bring in revenue this fiscal year between $317 billion and $320 billion.