Andrew Mok: Hi. Good morning. Commercial risk and ASO membership both came in above the high end of your initial guidance, can you help us understand what drove the membership — a better membership results for each segment? Thanks.
Andrew Witty: Thanks so much for the question. I’ll ask Dan Kueter, who runs our E&I business from UHC to respond to that. Dan?
Dan Kueter: Yeah. Hi, Andrew, and thanks for the question. Certainly encouraged with the broad based growth, share gaining growth, I would say, in our Individual segment, our Local Market segment, and our National Accounts business. Some of the key drivers underlying that, about a third of our Group growth gains were attached to our most innovative products and the expansion of those into 37 states now, on a fully-insured basis, to be — and also fully available nationally on an ASO fee-based business. Specifically inside the risk business, our individual and family exchange-based plans were a significant driver of the growth. We’ve seen some latency. From membership, we expected that would have come in from re-determinations into the final portions of 2023, now begin to emerge into 2024.
That’s been a significant contributor to that risk-based growth in the first quarter. As a punchline, I like our growth, I like the pricing, very much like the profile of both the groups and the consumers that we’re attracting. And finally, I’m really pleased with the consumer experience that our teams are delivering to those that we serve. Thanks for the question.
Andrew Witty: Great. Thanks so much. And as you saw, Dan’s organization delivered an extraordinary two million member growth in the first quarter, one of the highest growth rates we’ve seen for many, many years. And I think that really comes down to relentless focus on modernization of service offer and then delivery of that service offer, and I’m very proud of the whole team in the UHC Commercial businesses domestically for what they’ve done. Next question.
Operator: We’ll go next to Lance Wilkes with Bernstein.
Lance Wilkes: Thanks. Question on Optum Health. As we’re looking at outlook there, we’ve been really focused on capacity growth in the systems, do you guys have any insights for your capacity growth in Optum Health? Obviously, you’ve been taking some cost actions there, so interested in hiring trends. And then second, have you been renegotiating risk deals? I know that there was likely some of that for ’24. What’s the outlook for that and the impact of that in ’24 and the outlook of that for ’25? Thanks a lot.
Andrew Witty: Yeah, Lance, thanks so much. And I’m glad you’ve asked about Optum Health. I’m going to ask Dr. Desai to respond to that. Amar runs our Optum Health business. He has been doing a great job of continuing to mature that business for us, which for me, I think is one of the great headlines of Optum Health. Its continuous maturation as a sophisticated value-based care delivery organization, and Amar, maybe you could respond to Lance’s question.
Amar Desai: Yeah, thanks for the question, Lance. I’ll take the first one in terms of hiring trends. We continue to work with more providers in a deeper way continuing to grow across a range of arrangements. As you know, physicians across the country work with us in contracted affiliated arrangements as well as employed arrangements and we continue to have strong partnership and growth, both organically and also through some of our inorganic M&A activity. We don’t see a capacity constraint there. In fact, we’ve continued to see incredible growth with our payer partners to the second part of your question. The risk partner growth continues to increase across multiple payers. It’s being driven by some of the funding and benefit dynamics that are out there.
Folks are looking for a real stable partner to be able to grow with. We have worked with them continuously in terms of our contracts, both looking at the benefit and funding changes and ensuring that the funding level is appropriate for the risk that we’re taking on, and to be able to provide very high quality care across our membership. So we’re very proud of the growth we’ve had and we’ll continue to do so. Thanks.
Andrew Witty: Great. Amar, thanks so much. Next question.
Operator: We’ll go next to Sarah James with Cantor Fitzgerald.
Sarah James: Thank you. We wanted to understand a little bit better the $3 billion in IBNR. So just our back-of-the-envelope math suggests if 15% to 20% of claims from UHC run-through change, post-event that would be like assuming a third of the change-related claims are delayed, is that in the ballpark of where your change completion factor assumptions were? And keeping that conservative assumption of a claims like throughout the year, what does that imply for the seasonality of the remaining $0.41 to $0.61 GAAP impact from change?
Andrew Witty: Sarah James, thanks so much. John?
John Rex: Yeah. So I don’t know if I’d kind of go right with some of those stats that you pulled out in terms of where those fell, but here’s some insights I can offer on that. So, one of the elements we wanted to break out on the IBNR component is, so, as you know, what we report on the balance sheet you received this morning, medical costs payable is a combination of IBNR and medical claims payable. And so we’re hoping to provide some more transparency for you as you looked at the quarter and such, and a $3 billion increase in IBNR is significant. And then offsetting that on the — on that line item would have been the — really the funding advances. The component where we just made sure that as soon as the claim was in-house processed, we were speeding it out-the-door to get it to providers.
That was one of the components in addition to the interest-free loans we made that we were helping the provider community — the provider community with. As you talked — as you discussed kind of where we were, let’s say, today, we feel that UnitedHealthcare is essentially at normalized levels in terms of — in terms of claims receipts. As we sit here, we’re going to be super prudent in how we look at that because we know there are providers out there that could still be having trouble submitting claims, and still having troubles with payment flows and such, and so we’re going to be very appropriately constrained in how we think about that dynamic playing out here over the next — over the next couple of quarters. But really, those are the kind of mechanics of what’s going on between the IBNR component that you spotlighted and the full line of medical costs payable.
Andrew Witty: Right. Thanks, John. Next question.
Operator: We’ll go next to Gary Taylor with Cowen.
Gary Taylor: Hi. Good morning. Just wanted to follow-up on that point, John. My understanding is, on the IBNR that you report in your Qs and Ks includes unprocessed claims, inventories, so the $3 billion, is that just going to tie to the number we see when the Q comes out? Are you saying the $3 billion really is true unreported claims at this point?
Andrew Witty: Thanks so much, Gary. John?
John Rex: $3 billion is IBNR directly, that is to your point. That is the IBNR component of it, Gary.
Andrew Witty: Okay. Thanks, John. Next question.
Operator: We’ll go next to Erin Wright with Morgan Stanley.
Erin Wright: Okay, thanks. On capital deployment, you didn’t change your expectations for share repurchases, but how should we think about the priorities more broadly, whether it’s M&A or otherwise in your ability to be opportunistic on that front? Thanks.
Andrew Witty: Erin, thanks so much. I’ll ask John to comment on it.
John Rex: Yeah, Erin. Yeah, we didn’t update any of those components here. We continue to take a very balanced view in terms of how we think about our opportunities. You saw, certainly, that we had activity in the quarter from — in terms of both share repurchase and dividends. Also, we continue with robust opportunities in the marketplace in terms of other capabilities that we are looking at. So that all continues strong. So you’ll see us continue to balance those out nicely in terms of — in terms of the opportunities that are out there and with capacities really to approach all those elements strongly.
Andrew Witty: Yeah, and I continue to see very interesting diverse pipeline of M&A opportunity across the marketplace in terms of business areas that we have interest in. As I think you see some of the funding changes play out across the — across the next few years, I suspect that may also create new opportunities for us as different companies assess their positions. I think how we look at this situation is we have a good strong strategy for how we navigate through this dynamic. You’re seeing that play out super well in the first quarter performance of Optum Health and UHC and I think it gives us a sense of real confidence as we look not just in terms of our performance, but potentially how we might think about M&A opportunity. And as you rightly said, be somewhat opportunistic if those moments arrive. Next question.
Operator: We’ll go next to Whit Mayo with Leerink Partners.
Whit Mayo: Thanks. Good morning. Just back on the 2025 rate notice, I think you’re — if I’m hearing you correctly, it sounds like you’re framing this as modestly disappointing, but perhaps manageable. Just any more color on growth expectations for next year? And then if you could elaborate on the broker agent changes, what this could potentially mean for your strategy seems like a meaningful change. Don’t know, if you think about investing more into captive broker strategies, just any color would be helpful. Thanks.
Andrew Witty: Thanks so much for the question. I mean, obviously, we’re not going to get into give kind of ’25 numbers or expectation just yet, but Tim Noel, who runs our M&R business, certainly give you some good perspective on the rest of your question. Tim?
Tim Noel: Yeah, good morning, Whit. Thanks for the question. So on the final notice and some of the distribution elements of that, we continue to believe that there’s opportunities to improve the distribution environment in Medicare Advantage and have been in a dialog with CMS for several years on how to do that. Some of the elements of the final notice that were published recently are directly in line with some of our recommendations and some of them are relatively consistent, but not totally as we had conceived them. I would also say right now, it’s a little bit early to comment on how this might rebalance some of the channel mix, as still some questions on how some of the key elements of that will be rolled out. So we’re still waiting for a little bit more detail before we can get more specific on how it impacts go-to-market in ’25.
