A.J. Rice: Thanks. Hi, everybody. Congratulations on working through all this. Maybe just to make sure I understand a little more, the $800 million reserve that you’re holding out and you did comment, you didn’t take any prior period development to the bottom-line. I guess it sounds like you’ve used the word prudent several times in describing that. How much — just maybe to follow-up on the last question, how much of that is things that either from which you get insight from Optum Health or from your own ability to look at prior year claims versus what you’ve seen so far is what you really think is going to happen and how much of that is sort of add-on just because of the moving parts out there? And then it sounds like you’re basically saying that the care dynamics are similar, is there anything you call out outpatient, inpatient that suggest any variance relative to your MLR assumptions for the year when you started out?
Andrew Witty: So I’m going to ask John just to comment on the $800 million more specifically. I mean, I think as we said a couple of times, A.J., really not seeing anything stand out in terms of care pattern differentiation from what we really expected. I mean, as we mentioned earlier, that kind of pressure we saw at the end of Q4 and rolling into the very beginning of the year around some kind of winter syndrome vaccination dynamics, we talked about a lot last time. As expected that did subside. Beyond that, I would — which was what we were anticipating. Beyond that, I wouldn’t say there’s anything really to call out within all of that. John, could you maybe go a little deeper on the $800 million?
John Rex: Yeah, good morning, A.J. Yeah, so picking up on comment Andrew had made earlier, so what you’re really doing there is estimating what you didn’t see. So claims receipts that you may have not received in the quarter and trying to make an accommodation for that, as you said, a prudent accommodation for that. Just to acknowledge, that there clearly had to be some disruption in the quarter in claims patterns and so you’re trying to make some estimation in that zone to anticipate that. So you need to put it somewhere in the zone, it’s not zero and it’s not 800, somewhere in between, probably as you think about those elements and where you might — where you might land and so as we look out. And you should expect that we’ll probably continue with a judicious view over this, over the next several quarters actually also.
We want to make sure that we’ve got full visibility into this that the claims are flowing and as we sit here on April 16th, it does. We see at UHC. We see a fairly normal claims receipts and payments flows going on at this point, but we really want to be careful on that because we know there are certain care providers out there that may have been left out a bit, and so we’ll continue to be very judicious next quarter also in terms of assessing that.
Andrew Witty: Thanks, John. Thank you, A.J. Next question.
Operator: We’ll go next to Justin Lake with Wolfe Research.
Justin Lake: Thanks. First, I just wanted to quickly follow-up on A.J.’s question here around $800 million. Can you just be specific around, is that conservatism related to 2023, meaning you would have had up to $800 million of development that would have benefited the quarter or are you saying that you just took extra reserves that actually impacted Q1? Because we’re looking at an MLR that’s 50 basis points above where you kind of expected it and if you’re saying trend is in line, so we’re trying to figure out, was there a 50 basis point miss or are you saying that really that’s just the conservatism here. And then any — my question was really around the relative visibility on cost trend, right? Last year, it was somewhat opaque.
You kind of told us that there was some uncertainty and then if that uncertainty turned to certainty around, hey, trend is higher in Q2. How do you feel about your visibility this year? Do we have to wait till 2Q to kind of be able to declare that, hey, we’re kind of through this and you’re not seeing what the rest of the industry is seeing or do you do you think we probably have to get that updated again in second quarter? And lastly, any commentary on Q2 MLR and where you think you end up in the full year range for MLR would certainly be helpful if you could provide? Thanks.
Andrew Witty: Okay, Justin. Thanks for those questions. Let me — I’m going to ask John in a second just to go back and again just give you a little bit more definition around the $800 million as you asked. Just in terms of — and just in terms of cost trend and let me make a couple of comments and ask Brian maybe to go a little deeper as well and then come back to John. As I look at the cost trend this year versus last year, some big differences. So last year, really I think the core of the story of what led to that sort of step shift, if I can put it that way, in early Q2 — Q2 of last year. I think that was really — and the hindsight tells us that was really around a kind of post-COVID or end of COVID story playing out in terms of capacity coming on stream most importantly and to some degree of pent-up demand.
I actually think the capacity coming on stream was as much an issue driver of that as anything else. So I think to some degree a one-off. We don’t see anything like that. We’ve seen much more stabilization. We haven’t seen a step down from that trend. We’d be super clear about that. We haven’t seen it kind of go back down again, but we’ve certainly seen that kind of sustained activity without aggressive acceleration. And then the other thing, I would say to you is, as you would expect, given that shift we saw last year in the intervening year, we’ve put in a lot of sensing mechanisms across our organization, both in UAC and Optum, to look for early warning signals of changes, quite a low granularity in terms of trying to figure out how this pattern plays out.
Now as all our actuaries and any actual will tell you that the gold standard of knowledge on trend is a paid claim, but nonetheless, we’ve tried to put in place a lot more prospective sensing capability. And again, that’s kind of consistent with what we’re sharing with you. So we’re not really anticipating a big change there. I mean, obviously, the future is the future, but as we sit today, everything looks pretty much as expected. Brian, you may want to give a bit more from a UHC perspective.
Brian Thompson: Yeah. Thanks, Andrew. And I think you summarized it well. I’ll reiterate what you heard from John, which is what we’re seeing in these underlying service types, inpatient, outpatient, et cetera, are in line with what we had planned for, so I’ll reiterate that. Just to add to that level of improved visibility this year over last, certainly COVID being the biggest driver, but also re-determinations. Last year, we were at the beginning of that. This year, we’re nearing the end of that. So two key unknowns a year ago I think that contributed to perhaps a little less visibility, both of which I think we’ve really got a better view to this year. And the last thing I’ll just point out is, as we’ve paced through one-one, I also feel good about our business mix.
Again, early in the stages of evaluation of that, but how our growth has changed and what we’ve seen in those profiles from the growth that you’re seeing in our Commercial business to the growth in our Medicare business as well, really feel good about all those elements. So, yes, optimistic about the rest of the year and how it’s playing out against what we had planned for.
Andrew Witty: Great. Thanks, Brian. And John?
John Rex: Yeah, Justin, good morning. So I think the way you look at it, so overall the net view being, so we didn’t let any earnings or medical care ratio impacting development flow-through into the quarter. And when you look at it, so you can come at it, as to the normative course of assessments would have indicated some potential for favorable development in the quarter. We would — we took a position also that there was likelihood that there were claims we didn’t receive. And so in terms of the claims completion factors and such and so how that may have impacted and so you’re really netting that all off in the course of the quarter to try to just normalize that out, not having any impact from any of those — from those elements, and taking a pretty prudent view of where you might be in terms of the claims you received.
In terms of your question here on the Q2 MCR, at this distance, I put it in a similar zip code to 1Q, including similar impact from the cyber effects that we had also, and as I noted in response to A.J.’s question, we’ll be continued to be very judicious as we look at those patterns also on claims receipts. So we’ll continue with the judicious view of how we think about — how we think about development and those impacts as we step out here in the next couple of quarters to make sure we’re getting our claims receipt timings fully incurred here.
Andrew Witty: Great. John, thanks so much. Next question.
Operator: We’ll go next to Stephen Baxter with Wells Fargo.
Stephen Baxter: Yeah, hi, thanks. The business disruption costs you’ve projected beyond the first quarter are, I think, smaller maybe than most had expected despite the fact we’ve heard commentary from stakeholders reducing their dependence on Change Healthcare during the quarter. I guess, what are you seeing from customers on that front? I guess, how much of that recovery do you have on the revenue line? Do you have line-of-sight to versus you have to drive throughout the balance of the year to get to that no impact to 2025 that you seem to expect? Thank you.
Andrew Witty: Yeah, Stephen, thanks so much. So I’m going to ask Roger Connor, who runs Optum Insight to give you a little detail on this. First off, so I just want to — I just want to take a moment to pay credit to the teams for the speed in which they brought back the overwhelming majority, the functionality of Optum — of Change Healthcare after the attack. It’s been extraordinary example of really the resources of UHG, and frankly, the support of many of the biggest companies across America in the tech environment coming in to help recover from this particular attack, which was straight out an attack on the US Health System, and designed to create maximum damage I think. We’ve got through that very well in terms of the remediation and the build back to functionality, and Roger, maybe you could share a little bit of what you’re seeing and expect in terms of customer dynamics over the next few months.
Roger Connor: Yeah, we’ll do. Stephen, thanks very much for the question. So the way that we’re thinking about the whole cyberattack response is two key areas of focus. First of all, as Andrew mentioned, good progress on system restoration. If you look at the biggest areas where we have the largest number of customers, that’s pharmacy, claim, and payment, we’re up to 80% functionality and that’s continuing to improve day-by-day. Now we’ve still got work to do. We’ve got another set of products coming online in the number in the coming weeks, but pleased with that progress. I think your question is really about our next focus, which is recovering the business and this is about bringing those products back, but actually bringing them back stronger where we can.
We’re adding functionality where we can too. But then also bringing back customers, who because of the outage have to go elsewhere to get things like their clearance house support. Now we are confident in our ability to do that. Why? Well, first of all, the portfolio and the differentiation we have, which is good. But also, as you can imagine, we’re talking to those customers all the time and they want their functionality back. They like what they’ve got or they had with Change and they want to get that back. So we’re working with them to ensure that we can actually do that. Also, we provided financial support to a number of our clients and they appreciate that. They have said to us that they appreciate it. That’s a signal that we are committed both to them, but then also to this marketplace as well.
So when you add those elements up, Stephen, that’s where we’re confident. We’ve got more work to do. This has been a heavy lift and we’re going to continue that work. But that’s why we’re confident in getting back to that baseline performance in 2025.
Andrew Witty: Roger, thanks so much. And I think, Stephen, what you heard in Roger’s response there is a couple of really important features of the character of UnitedHealth Group, super high resilience and we will always stand by our customers and clients, and when an attack like this happens, which puts our customers and clients at risk, we will do whatever it takes to make sure they get through that, whether it’s technical fixes or financial support, we are going to stand by our clients, who in this case are the providers and the systems across America who look after American patients and we will do that. And I think that means a lot to a lot of people and it’s an important capability to have running through the backbone of American healthcare. With that, Stephen, thanks for the question. Next question.
Operator: We’ll go next to Kevin Fischbeck with Bank of America.
Kevin Fischbeck: Great. Thanks. Just want to go more — a little bit more into the visibility that you guys think that you have into claims today. It sounds like you feel like you’re largely back, but I guess, where would you say today that you are from a percent visibility into claims versus the same time last year? And I know that there’s forecasted improvement, but I think there’s a lot of focus on the ability to price 2025 correctly. So by the time you’re submitting your MA bids, how much back to normal? What percentage back to normal do you think you’ll be from a claims perspective at that point? And then finally, I’m used to hearing you guys reiterate 13% to 16% long term EPS growth, but I didn’t hear that in the prepared remarks. I just wasn’t sure if that was due to time or whether there was anything that you were trying to say there. Thanks.
Andrew Witty: All right. So I’m going to ask John to comment on your substantive question, Kevin, and I’m going to ask you just to stay on the line for my last paragraph for closing comments for the second part of your question. John?
John Rex: Good morning, Kevin. So as we sit here today on April 16th, I would say, UHC is pretty much back to normal levels in terms of claim submission activity. We view it as normalized now. That we’re seeing claims slowing like they — we’d expect them to be flowing and moving along. So that’s all progressing quite well, which assists a lot with the piece that you were just describing here in terms of where we think that is and as we move forward and look over the next month plus to finalize our bid submissions and such. So feel good about that in terms of our visibility and insights.
Andrew Witty: Yeah. Thanks so much, John, and thanks so much, Kevin. Next question.
Operator: We’ll go next to Nathan Rich with Goldman Sachs.
Nathan Rich: Hi. Good morning. Thanks for the question. I wanted to ask on the reported DOJ investigation. I’d be curious, has the company had kind of dialogue with the DOJ and do you have a sense of timeline for what the next steps might be as we look about what — for what the possible outcome of this process could be?
Andrew Witty: Hey, Nathan, thanks so much for the question. Listen, I think you’d probably expect we don’t comment on these sorts of matters and I don’t think it would be appropriate to do so today, and certainly, we never have done in the past. So it’s not something we’re going to get into in the call, but I appreciate the interest. Thanks. Next question.
Operator: We’ll go next to Andrew Mok with Barclays.
