Q4 2024 UnitedHealth Group Inc Earnings Call
And our current and periodic filings.
This call will also reference non-GAAP amounts a reconciliation of the non-GAAP to GAAP amounts it's available on the financial and earnings reports section of the company's Investor Relations page at Www Dot Unitedhealth group Dotcom.
Information presented on this call is contained in the earnings release, we issued this morning and in our form 8-K dated January 16th 2025, which may be accessed from the Investor Relations page of the company's website.
I will now turn the conference over to the Chief Executive Officer of Unitedhealth Group Andrew witty.
Jennifer: Jennifer Thank you very much and good morning, everyone I'd like to start by expressing our sincere. Thank you from my colleagues on for me for the overwhelming expressions of condolence in support following the murder of golf friend, Brian Thompson.
Many of you knew Brian personally.
Jennifer: Can you how much he meant to all of us and how we devoted his time to helping make the health system work better for all of the people. We're privileged to serve he would dive in with passion and care and to find solutions to improve experiences whether for an individual consumer an employer or a public health agency.
Jennifer: Right now there are 400000 nurses doctors case work as customer service specialist pharmacists technologists and so many others in this organization who share that commitment and are determined to advance that work.
Jennifer: The task in front of US all of US health care providers payers employers drug companies and policymakers is to continue improving quality and health outcomes for individuals and their families.
Jennifer: While lowering costs for everyone.
Jennifer: We need to build on the unique foundational strengths of health care in America and address the areas, we can make work better.
Jennifer: Among those strengths world, leading innovation the U S has developed the most advanced clinical approaches and patient centric care at a pace not seen anywhere else.
It's why if provided with the option people from all over the world come here to seek care for the most complex conditions.
Yes, the health system needs to function better.
Jennifer: Through decades of federal and state policymakers and private sector innovation, we have a variety of programs structures and processes.
Jennifer: There are strong merits to that variety as they can be more tailored to meet the specific needs of individuals at various stages of life and health status.
And provide extra help for those who need it.
Jennifer: It avoids a one size fits all approach.
Jennifer: But it needs to be less confusing less complex and less costly.
Jennifer: America faces the same fundamental health care dynamic because the rest of the world.
Jennifer: The resources available to pay for health care, a limited while demand for health care is unlimited.
Jennifer: Every society wrestles with that issue and approaches it in various ways.
Jennifer: We have incredible opportunities here to improve system performance, both from a care and cost perspective, while building upon the foundational strengths I just mentioned.
Jennifer: The mission of this company why we exist is to improve the system for everybody and help people live healthier lives.
Jennifer: That means getting more people into high quality value based care and keeping them healthy in the first place.
Jennifer: So fewer Americans find themselves with a chronic and in many cases preventable disease.
Jennifer: It means continuing to invest in programs like Medicare advantage.
Jennifer: Which by providing coordinated care to seniors is proven to deliver better health outcomes at lower cost to consumers and taxpayers compared to fee for service Medicare.
Jennifer: Seniors recognize that value, which is why the majority of them choose Medicare advantage.
Jennifer: It means making health care easier to navigate.
Jennifer: We're enhancing digital tools for consumers harnessing data and using AI. So they can find the best value care option and decide what is best for themselves and their families.
Jennifer: People's Health interactions should be as intuitive and seamless as every other aspect of their lives banking shopping streaming.
Jennifer: This past year, we saw an extraordinary increase in the use of these modern channels.
Jennifer: We know there is still a large gap there and we intend to keep at it until it is closed.
Jennifer: It means making coverage and cost easier to understand.
Jennifer: Just one example, where we already have advanced plans.
Jennifer: So we're eager to work with policy lead us to use standardization and technology to speed up turnaround times for approval of procedures and services for Medicare advantage patients and to materially reduce the overall number of prior authorizations used for certain services.
Jennifer: Some of this work we can do on our own.
Jennifer: And we're doing it.
Jennifer: But we're encouraged also by industry and policymaker interest in solving for this particular friction across the whole system.
Jennifer: Ultimately improving health care means addressing the root cause of health care costs.
Jennifer: Fundamentally health care costs more in the U S. Because the price of a single procedure.
Jennifer: Is it all prescription is higher here than it is in other countries.
Jennifer: The fact is the price more than utilization drive system costs higher.
Jennifer: Tackling that problem will require all parts of the system and policymakers to come together.
Jennifer: Yes, there are participants in the system, who benefit from these high prices.
Jennifer: Lower cost equivalent quality sites of service for example can be good for consumers and patients, but threatened revenue streams for organizations that depend on charging more for care.
Jennifer: Another example is the persistently high cost of drugs in the U S leaving.
Jennifer: Leaving American consumers employers and public agencies to pay disproportionately more than people in other countries.
Jennifer: Just look at G. L P. One prices.
Jennifer: One drug which costs $900 in the U S cost about a 10th of that in Europe.
Jennifer: Pharmacy benefit managers play a vital role in holding those prices down.
Jennifer: Which is why drug companies and their allies have spent the past several years attacking them.
Jennifer: Tomorrow Rx alone delivers many tens of billions of dollars in savings annually versus the pricing set by the manufacturers, including on the G. L. P loans.
Jennifer: That sharply reduces the gap versus other countries, but even then prices in the U S are still multiples of what the rest of the world pays for the same drugs.
Jennifer: Last year, our ppm pass through more than 98% of the rebate discounts, we negotiated with drug companies to our clients.
Jennifer: While we offer customers a 100% pass through options a small number.
Jennifer: Historically elected other models.
Jennifer: We're committed.
Jennifer: To fully phasing out those remaining arrangements so that 100% of rebates will go to customers by 2020 at the latest.
Jennifer: We will continue to encourage all of our clients to fully pass these savings directly to patients at the point of sale as we already do for all of the people we serve in our fully insured employer offerings.
This will help make more transparent who is really responsible for drug pricing in this country.
Jennifer: The drug companies themselves.
Jennifer: Healthcare in every country is complex and the solutions are not simple.
Jennifer: But you should expect this company to continue to work at it.
Jennifer: Finding what is needed developing solutions, bringing those solutions to scale.
Jennifer: Making a positive impact on the lives of millions of people.
Jennifer: We deliver on our commitments to the people, we serve including our investors.
Jennifer: Even in highly challenging periods like 2024.
Jennifer: Our results bear out that we find a way even if it's not always how we may have in initially envisioned the path.
Jennifer: Among some of the formidable challenges, we navigated over the course of the year.
Jennifer: With the first year of the three year CMS Medicare rate cuts.
Jennifer: The effects of the state driven Medicaid member re determinations.
Jennifer: And the change healthcare cyber attack.
Jennifer: Our people found a way to deliver solidly within the range. We first offered back in November of 2023.
Jennifer: All while improving patient and consumer health outcomes and experiences.
Jennifer: Focusing on quality and expanding upon our potential to help make the health system work better for everyone.
Jennifer: We are invigorated by the path ahead.
Jennifer: There are so many areas that can be enhanced reworked re engineered or even scrapped to make the health system work better.
Jennifer: As we know it needs to.
Jennifer: That is both our responsibility and it's our passion.
Jennifer: We begin 2025 with a strong outlook for the year as we continued to deliver on our commitments and excel for those we serve in all of our key growth pillars.
Jennifer: Now John will walk you through this performance in a little more detail.
John: Thank you Andrew.
Speaker Change: And I'll add my deep gratitude for the enormous outpouring of support over the past few weeks.
Speaker Change: Brian helped build this company and forge deep trusted relationships for over 20 years.
Speaker Change: And the positive impact he had on people will be felt for years to come.
Speaker Change: This morning, I'll discuss both 2024 results and our performance expectations for 25 <unk>.
Speaker Change: Including some of what we had planned to discuss with you in December.
Speaker Change: 2024 revenues of over 400 billion and adjusted earnings per share of $20 $27 66.
Speaker Change: Well within the outlook ranges, we set out over a year ago.
Speaker Change: To be sure things played out differently than initially anticipated.
Speaker Change: But it is an enduring trait of this enterprise that we deliver on our commitments to the people we serve and to you <unk>.
Speaker Change: Even amid unforeseen circumstances.
Speaker Change: Over the course of 'twenty, four we undertook initiatives and made investments to strengthen us for the future.
Speaker Change: Initiatives to improve consumer experience and bring new innovation to market more quickly.
Speaker Change: Drive the most compelling ways to further our mission to help make the health system work better for everyone.
Speaker Change: And continue to optimize and refine our offerings and business portfolio to enhance future growth potential.
Speaker Change: Whether that meant moving into new opportunities reconfiguring or moving out of areas, which contributed historically, but may no longer be core.
Speaker Change: All with an eye to unlocking value.
Speaker Change: We know you have a number of questions that we were not able to discuss last month.
Speaker Change: So today I'll start by stepping through a couple you have indicated are top of mind.
Speaker Change: The first one is why our 24 medical care ratio was 150 basis points above our original outlook.
Speaker Change: It's important to frame up the challenges of 24 to offer some perspectives on the commitment and response of our people.
Speaker Change: Compared to the midpoint of the care ratio range, we stepped out with over a year ago that alone created a nearly $5 billion gap we needed to overcome.
And that's before we get to the nearly $1 billion and business disruption impact due to the cyber attack.
Speaker Change: So we start with about $6 billion and unanticipated impacts just from these two examples.
Speaker Change: In addition to managing through the already known multibillion dollar impact of the Medicare rate cuts as we sought to preserve as much benefit stability for seniors as possible.
Speaker Change: Regarding the elements impacting our 2000 and for care ratio, we spoken about the key factors on prior earnings calls so no surprises here.
Speaker Change: The first comprise about 70% of the total impact and are comparable in magnitude to each other.
Speaker Change: First the mix of people served.
We ended up with a different profile of consumer than expected.
This is because of one factor.
Speaker Change: We didn't grow as anticipated due to the unusual Medicare advantage benefit designs in the marketplace in 'twenty four.
Speaker Change: Next the timing mismatch between the health status of the remaining people being served by Medicaid.
And lagging state rate updates.
Speaker Change: Then there were the costs related to the cyber attack and our South America business impacts.
Speaker Change: The remaining two elements comprise about 30% of the impact on our evenly split.
These include a more rapid than expected acceleration in the prescribing of certain high cost medications as drug companies took early advantage of the inflation reduction Act.
Speaker Change: And an aggressive upshift in hospital coding intensity.
This is incorporated into our outlook, even as we work to get it back in line.
Speaker Change: Those are the 24 care ratio elements.
Speaker Change: Next question given all of that are we confident in the adequacy of our pricing for 25.
Speaker Change: The answer is yes, and here's why.
Speaker Change: To start for 'twenty five the outlook, we shared in December incorporates a view of care activity commensurate with what we saw in 24, even the care activity, we experienced as we exited the year.
Speaker Change: I'll break that down with some business line perspective.
Speaker Change: In Medicaid we.
Speaker Change: We see the gap between People's Health status and state rates narrowing over the course of the year.
Speaker Change: Our outlook assumes a measured pacing of that process.
Speaker Change: Actions to date, including the important January one renewal cycle support this view.
Speaker Change: And commercial.
Pricing for 'twenty five is appropriately capturing the care activity we are seeing.
Speaker Change: This is evidenced by growth heavily weighted toward self funded offerings.
We will continue our disciplined approach.
Speaker Change: In Medicare we had strong AEP results, which included winning back people. We had served previously and near record retention.
Speaker Change: These are a direct result of our long history of offering sustainable benefits for seniors.
Speaker Change: With strong retention and that many returning consumers we start the year with highly informed insights into the care needs of the people we will be serving.
Speaker Change: In addition, this year, we have seen a notable uptake of our more managed offerings think HMO style, which provides strong value for consumers effective care tools for doctors and more predictable performance.
Speaker Change: We expect a 25% full year medical care ratio of 86, 5% plus or minus 50 basis points 100 basis points above the 24 result.
Speaker Change: In addition to factors discussed earlier, the increase is driven by <unk> impacts.
Speaker Change: The second year of the Medicare funding cuts.
Speaker Change: A continued mix shifts towards public sector offerings.
Speaker Change: And a respectful view of cure activity.
Speaker Change: Yes.
Speaker Change: Our 24 operating cost ratio improved about 150 basis points over the prior year.
Speaker Change: Roughly half of the change was driven by contributions from the business portfolio initiatives mentioned earlier.
Speaker Change: And the other half was due to accelerating our efforts to realize operating efficiencies.
Speaker Change: Even as we improve consumer experiences.
Speaker Change: Some of these advances are a result of the very early stage impacts we are beginning to realize from AI driven initiatives to help our customer service representatives respond to consumers' needs more effectively and quickly.
Speaker Change: And we see continuing opportunities both in the near term with operating costs for 25, improving still further and well beyond.
Given the rapidly expanding scope and impact of these initiatives.
Speaker Change: These actions and the resourcefulness of our people helped deliver upon the objectives set out over one year ago.
Speaker Change: And helped to partially balance the multiple billions of unanticipated impacts.
Speaker Change: With that I'll run through our businesses offering some key points for each starting with Optum health, where revenues grew to about $105 billion in 'twenty four and are expected to approach 117 billion in 'twenty five.
Speaker Change: Our care delivery business continues to deepen its presence in existing areas, while expanding into new geographies and services.
Speaker Change: And 25, we expect Optum hurt health will serve about $5 4 million value based care patients.
Growth of 650000 over 24.
Speaker Change: While our current position provides a solid footing.
Speaker Change: It's a small fraction of the hundreds of millions of patients who can ultimately benefit from value based care.
Speaker Change: We see value based care is foundational.
Speaker Change: It is perhaps the fullest expression of our mission.
Speaker Change: As Andrew noted the outdated activities based fee for service system won't help the health system work better for people.
Speaker Change: The value based care or outcomes based aligning processes actions and incentives, helping keep people healthy in the first place.
Speaker Change: And just seeing them when they are sick.
Speaker Change: Aten health is an integrated multi payer care delivery company, helping to lead the transition to a truly sustainable value based care system.
Speaker Change: As we move into 'twenty five we will continue to enhance access and care integration through the home.
Speaker Change: A much needed area to help people with their health.
Speaker Change: More than three quarters of our in home patient visits result in a primary care visit within 90 days.
Speaker Change: Medicare advantage patients with chronic conditions, who received a homecare visit have a lower rate of ER visits fewer inpatient stays stronger health outcomes and a better experience.
Speaker Change: All while saving the health system billions.
Speaker Change: Turning to optimize Rx revenues in 'twenty four grew to over 130 billion and will be about $146 billion and 25.
Speaker Change: Our pharmacy benefits management team again had customer retention exceeding 98%.
Speaker Change: While welcoming a record 750 new clients.
Speaker Change: Further proof of the value sophisticated employers health plans and labor unions.
Speaker Change: <unk> has the ability to negotiate lower drug prices for consumers.
Speaker Change: <unk> pharmacy care services support the entire system and the delivery of clinically driven pharmacy care, serving the highest need and hardest to reach patients.
Speaker Change: These offerings include community pharmacies specialty and infusion drug services, all large strongly growing areas with our current presence quite small.
Speaker Change: Optum insight revenues were $19 billion in 'twenty, four and <unk> 25 will approach $22 billion with a backlog of 35 billion.
Speaker Change: Sales of new products begin to take hold.
Speaker Change: And the customer clearinghouse business continues to rebuild.
Speaker Change: The solutions offered through optimum XI and our health technology growth pillar delivered at scale will improve consumer experience and payment and claims flows.
Speaker Change: Enable access to the next best action guidance in a doctor's workflow.
Speaker Change: And help life sciences customers more rapidly bring innovations to market.
Speaker Change: And there will be much more to follow.
Speaker Change: Shifting to United Health care full year revenues in 'twenty, four approached 300 billion and $4 25 will approached $340 billion as we grow to serve upwards of an additional $1 9 million people balanced across both the commercial and public sectors.
Speaker Change: Within our domestic commercial offerings, we grew to serve two 4 million more people in 'twenty four and expect to continue to grow strongly in 'twenty five, especially in our self funded offerings, which serve some of the most sophisticated buyers of healthcare large employers.
Speaker Change: The fact that so many more people are choosing United healthcare is a direct result of our bringing much needed innovation to these more mature markets through consumer centric offerings.
Speaker Change: As noted earlier, United Healthcare's, 24, Medicare advantage growth was impacted by the unusual benefit designs in the market.
Speaker Change: Our focus has always been on providing consumer stability and sustainable value.
Speaker Change: Factors that has built confidence and trust over the long term.
Speaker Change: As a result in 25, we expect growth of up to 800000 people and individual group and special needs offerings.
Speaker Change: And the growth outlook for the years ahead remains strong with nearly half of American seniors still an outdated Medicare fee for service offerings, which provide less value to them and cost taxpayers more.
Speaker Change: In Medicaid, we expect to serve more people in 25 with Redetermination activities now concluded.
Speaker Change: United Healthcare value proposition is resonating with state customers consumers and provider partners and we are participating in a substantial number of expansion proposals.
Speaker Change: Most recently, we were honored to have been awarded a new opportunity in Georgia.
Speaker Change: Our growing businesses support and are supported by substantial financial capacities and a strong balance sheet.
Speaker Change: In 'twenty four we deployed nearly $17 billion in growth capital to help build for the future further strengthening our capabilities to serve more people more comprehensively.
Speaker Change: We also returned over $16 billion to shareholders through dividends and share repurchase.
And 25, we expect cash flow from operations will approach 33 billion or one two times net income.
Speaker Change: We will continue to deploy growth capital and remain committed to returning to shareholders as outlined in December.
Speaker Change: Our growth capital deployment efforts deliver their greatest benefits over the course of two four even six years.
Speaker Change: And as new capabilities are scaled and deployed across the enterprise and beyond.
Speaker Change: Yeah.
Speaker Change: To summarize our strong start to the year reinforces the growth objectives, we shared last month.
Speaker Change: And is underpinned by the broad growth drivers operational excellence and strategic capital deployment, you've come to expect from us.
Andrew John: Now I'll turn it back to Andrew John Thank you.
Andrew John: The strength of this organization lies in the resilience of our people and our fundamental belief that there is no higher cooling and helping other people and nothing more vital to the human condition and health care.
Andrew John: Looking ahead to 2025 and beyond we are confident in our ability to continue to add value to the health system through our focus on value based care and consumer orientated efforts to help build the health system America deserves.
Andrew John: And that's also why we remained solidly committed to our long term, 13% to 16% growth objective.
Andrew John: That reflects both the opportunities and the capabilities that we have.
Andrew John: And now operator, we'll open it up for questions.
Speaker Change: The floor is now open for questions. At this time, if you have a question or comment. Please press star one on your touch I found you may remove yourself from the queue by pressing star two on your Touchtone phone, we ask you to limit yourself to one question. If you ask multiple questions. We will only be answering the first question. So we can respond to everyone in the queue.
Andrew John: This morning.
unknown: Well go first to a J rice with UBS.
Andrew John: Yes.
Speaker Change: Hello, everybody.
I appreciate the words about Brian.
Speaker Change: By all of Us.
Speaker Change: Just maybe to focus in on the comments about cost trends in the MLR, obviously in the fourth quarter theirs.
Speaker Change: Variance relative to consensus expectations that was probably a little greater than what we thought.
Speaker Change: It sounds like the cost items, you're calling out are similar to the things you had seen all year long was there anything.
Speaker Change: The change in those.
Speaker Change: The city of any of those trends and anything any unusual items in there that impacted the results and it sounds like you're still confident in your 25 MLR outlook. So nothing you saw in the fourth quarter changes your view on 25.
Speaker Change: Hi, Jay Thanks, So much for your question I'm going to ask John in the sector. Obviously go much deeper in response to your question, but just to the last part of your question, Yes, you're totally right nothing we saw there.
Speaker Change: Changes our view of 'twenty five we feel very good about how we priced into 'twenty five we feel really really good about how the mix has come in in terms of that growth. That's a huge difference to 'twenty four.
Speaker Change: And we really didn't see anything in Q4 that we believe represents a challenge to that but you're going to 25 I'd love jumped to go deeper for you on the Q.
Jay: Hey, Jay So a few things on this so in terms of the items that we had called out on the third quarter call. So the hospital coding intensity in the especially prescribing trends that we're seeing very much in line with what we saw in the third quarter in terms of that run ran into the fourth quarter. So in line with a view on that.
Jay: We're seeing acceleration that we're seeing stabilization and those trends I would tell you at the levels, we saw before and we expect that to continue.
Jay: Especially prescribing.
Jay: Those those trends or something we anticipated and our 25 outlook and as we had noted back in the third quarter that was something that up that.
Jay: <unk>.
Jay: Just moved faster in 'twenty four than we expected, but but in terms of the levels, we're seeing and how we anticipated that in our 25, we feel very good about that.
Jay: Those coding intensity levels staying at the levels that we saw that we had seen also and then the other elements that we talked to a mixed kind of an important element in terms of.
Jay: The improving we see as we move into 'twenty five and those elements.
Jay: Callout kind of things in the in the <unk>.
Jay: Couple of things I'd say, so first of all the move fast mostly driven by seasonality typical seasonality you see normal deductible wear off those elements are move sequentially that was similar in terms of the basis point move that we saw a year ago also <unk> map, but to call out a couple of things.
Jay: A point here.
Jay: So in the sequential move I'd call up probably 80 to 90 basis points I've put into the revenue effect category here. So in that I think about some elements that might have been coming in such as group MA refunds and elements there were.
Jay: Our performance, which was strong and over the course of the year and that those those hitting in the quarter just some elements like that that I put in the nonrecurring revenue non non run rate revenue category in terms of impacts that and that was probably about 80 to 90 basis points of the impact <unk>.
Jay: Flu RSV impact that typical seasonal that was kind of a I'd say in the quarter to 50 to 60 basis points, that's kind of a normal move in and then think of the rest of that move being in the zone of pretty much expected seasonal impact. So the one element I'd call out there is the revenue effects that probably would be would probably be having some impact. Thank you.
John: So much John and Thanks again, Jay for your question next question. Please.
Speaker Change: We'll go next to Josh Raskin with nephron.
Josh Raskin: Hi, Thanks, a question on the Optum Health segment I guess.
Josh Raskin: And I apologize if I missed this but did you comment on the change in the consumers I know you've talked about portfolio changes and things like that but the consumer count dropped about $4 million and then sort of a noticeable drop in margins and I'm wondering if some of that is related to the rebates that you just mentioned in terms of the impact on <unk>.
Josh Raskin: Uhm side as well.
Speaker Change: Yeah, Josh. Thanks, So much for your question, let me ask John to start and then ask Dr. <unk> to decide to pick up a few details on that please. Thanks. Good morning, Josh So in terms of the consumer talent and impacts on that so that would go into the category of some of the strategic initiatives that have been ongoing here. So think about some elements were.
Speaker Change: But we may have just been that we have maybe.
Speaker Change: Deemphasizing in terms of our focus on that so an area that we deemphasize that would go into that category as urgent care.
Speaker Change: We're approaching that differently now there was a time when kind of Standalone urgent care was an important element here as you start developing more geographic density. However in a marketplace you can probably better serve those patients by just having one of your clinics have after hours.
Speaker Change: After after hours, a presence and a focus on that so.
Speaker Change: One area that we have diminished in terms of emphasis as urgent as urgent care and that's it that's one of the areas, we got out and so really the those counts are driven by a call it somewhat narrow offerings typically.
Speaker Change: That we had been diminishing and that were part of kind of some of the strategic initiatives.
Speaker Change: That we talked about.
Speaker Change: In terms of kind of some of the broader margin impact you are seeing in some of the emphasis and where Optum health was headed was headed in terms of in the <unk> and where their focus with I'll turn that a doctor on our side to comment on.
Speaker Change: Thanks, Josh.
Speaker Change: Josh.
Speaker Change: So.
Speaker Change: To take a step back look posted <unk> 28.
Speaker Change: <unk> been executing on our multiple year plan to reshape the business, including efforts around direct patient engagement and medical management as well as integrating our business.
Speaker Change: On the operating cost efficiencies so as we are.
Speaker Change: Look at the quarter, we took a number of planned actions, including restructuring and refining some of our legacy contracts, which had a one time impact of the year.
Had some membership mix changes, which has been noted and then we did make some investments in the quarter around clinical quality and the stars program as well as Onboarding for new membership coming on for one one.
Speaker Change: That being said, we feel very good about our position stepping into 2025.
Speaker Change: AEP growth was strong we've also had very strong retention across our care delivery organizations again, reflecting the strength of our provider network and the differentiated care they provide.
Speaker Change: We also have a better understanding of B 28 is where in the second year of it and with this progression our payer relationships and contracts have evolved into the year as we step into 25 were in a more favorable spot and then the impact of our engagement efforts in 2024, 85% of our value based patients we're engaged at 90%.
Speaker Change: Among our highest risk patients and again this is best ever patient engagement for US and is the foundation for the maturation of our value based cohorts over time. So overall, our operating model for Optum health is stronger it's underpinned by significant momentum around these engagement and affordability as well as operating efficiencies.
Speaker Change: And we're confident in delivering against our long term margin targets. Thanks for the question Josh. Thanks, So much and I'll maybe just.
Speaker Change: Finish off that response, Josh if I might buy.
Speaker Change: And it really reiterating some of you heard me say just a month ago that even in a very challenging year of 2024 with a lot of changes coming from the outside world in terms of funding reductions and the like from the administration.
Speaker Change: We go.
John: Alongside our commitment to perform we also relentless around how we continue to modernize and shape the company for the longer term and what you heard John just talk about and you just heard referred to really there is within Optum health alongside strengthening our core business. We recognized some parts of that business not necessarily as important in the future as they were.
John: In the past, we're not we're not going to shy away from making the choices to ensure that we have real clarity and focus on what we know.
John: Port saw business and most importantly, it gives us the highest chance of giving the best possible service to patients of members who we serve.
John: And I think during 'twenty four you saw the organization be very focused not just on the year on the shape of how we want the company to develop over the next several years and Thats really what youre seeing reflected in the commentary that John an element just touched on.
Josh Raskin: Josh Thanks, so much for your question if we go to the next question.
We'll go next to Lisa Gill with J P. Morgan.
Lisa Gill: Hi, Thanks, very much for taking my question, Andrew I wanted to talk about PJM reform there.
Lisa Gill: Seems to be a very large drumbeat right now that we'll see reform at some point in 2025.
Lisa Gill: Really two things here one what do you think that means to your business and then secondly, you talked about educating those in the marketplace to better understand what you actually bring to the market from a PJM perspective.
Lisa Gill: Are there incremental ways that you can potentially maybe educate congress because it seems to be a very big disconnect firsthand, how congress is doing versus what pbms actually do.
Lisa Gill: Lisa Thanks, so much for your question and you know this is obviously a topic of a lot of people's interests and thats not surprising because pharmaceutical prices in the U S are too high.
Lisa Gill: I just made that Super clear in my comments and it's not the first time, you've heard any of those at United make those comments over the last several years.
Lisa Gill: As you think about that the issue really is that.
Lisa Gill: You have a situation where the pbms are really the only effective mechanism across the system, which really holds the pharmaceutical company to account once it chooses to set its price and by the way also has the freedom to inflate that price every single year, which is what we see happen. The P. P. M is there to try and hold that to account to negotiate on behalf of <unk>.
Lisa Gill: Employers Union states and others to try and bring down those prices, but within that Lisa is the very first thing that people really need to truly understand the P. B M axe on behalf of the ultimate payer the employer the union the state such acts on their behalf because they're ultimately the ones who are typically underwrite.
Lisa Gill: And the ultimate cost of the of the medicine for the patients that consumers who.
Lisa Gill: Beneficiaries of that plans are supported by those organizations that is often lost in terms of how this mechanism works and.
Lisa Gill: And it's critical to understand it.
Lisa Gill: What's important therefore is that we and you heard me make a couple of references this.
Lisa Gill: I hope alongside others across the sector really focus on the facts of the situation prices in America are de Novo set too high relative to any other price in the world.
Lisa Gill: First off secondly, they're inflated every year, which is pretty unusual when you compare that to the rest of the world.
Lisa Gill: Thirdly, as we negotiate to bring those prices down the benefit of that negotiation those rebates, which are achieved a very significant are passed back to the employers unions in the states.
Lisa Gill: They choose what to do with those rebates now in the case of United Health care, where in the population of employee benefits that we manage where we have essentially <unk>.
Lisa Gill: Troll over that decision we pass those all the way through to the consumer and the patient who receives the drug so they see the benefit of that rebate.
Lisa Gill: We'd like to see others do the same.
Lisa Gill: Within the overall system.
There is also opportunity for people to lose a thread of where the money goes in the system and that is often what you hear policymakers be concerned about.
Lisa Gill: That is why this morning, we are committing to a full 100% pass through of all rebates that we negotiate at the P. B M back to the payer the state all the Union right now we already passed 98% of that through but unfortunately, even not just a small residual that we.
Lisa Gill: <unk> retained because those clients want to pay us that way is enough to give people the excuse to argue that the system is not working properly we're taking the excuse off the table today. We are committed to full transparency. We are committed to full pass through declines we believe that takes away the excuse.
Lisa Gill: Who really is setting the price and we would like to work with others across the system to relentlessly achieved the lowest net cost for everybody in the system, we'd like to see patients see the benefits of that.
Lisa Gill: We'd like to work with anybody who wants to work with us to make it happen and that's how we're going to engage this year with policymakers and others across the country.
Speaker Change: With that Lisa Thanks, so much for the question. Let me go to the next question. Please.
Speaker Change: We'll go next to Stephen Baxter with Wells Fargo.
Stephen Baxter: Hi, Thanks, just stay on the policy front I was wondering if you had any early perspective to share on the Medicare advantage advance notice for 2026, I guess anything you see is encouraging or any potential areas of concern as you progress and advance the final and then I guess as a related point, yes. It seems like many would think that the reimbursement is embedded in these rates is still not reflect.
Speaker Change: Yellow dated cost trend that we saw in 2024.
Speaker Change: Taking a step in the right direction that accompany perspective that you're sure. Thank you.
Speaker Change: Hey, Stephen Thanks, So much for the question I'm going to ask Tim to Tim Miller to comment on that please yes. Thanks for the question Stephen.
Speaker Change: These rates are preliminary at this point in time and won't be finalized until April.
Speaker Change: And.
So therefore, probably not super productive to start speculating on elements of that I will say, we are looking forward very much to engaging the new administration on this item and also also.
Speaker Change: Most of other items as it relates to the Medicare advantage program. Thanks, Greg. Thanks, So much Tim.
Steven: As you suggest Steven.
Steven: Important is that this is all rational right. So.
Steven: It's not difficult to figure out in retrospect, what trend walls, and we'd like to hope that over the next few cycles, we see that reflected in a way that it hasnt been over the last several years and that for US is really the important element of what we hope will come in it it's simply just rational and it's.
Steven: It's interesting when you look at the states in Medicaid do you see that kind of rational behavior, we've seen that improvement that we've been super clear that theres been historic offset lag. If you will to that that's not surprising that can create some discontinuity as we saw this year in 'twenty four but underneath all of that we see rational understanding and engagement from Mr.
Steven: We Super appreciate that it is important and that's what we want to hope to see a return.
Steven: The MA rate set it in a way that we have not seen over the last several years.
Steven: Okay next question please.
Justin Lake: We'll go next to Justin Lake with Wolfe Research.
Justin Lake: Thanks, Good morning.
Justin Lake: Got a question here for first off I wanted to ask a quick follow up on the Medicare advantage our revenue adjustment.
Speaker Change: The MLR for the quarter came in higher than expected. It appears this might have come as a surprise given that the employers you know the size of the employer segment. It feels like this adjustments pretty large like maybe 5% or more of annual revenue. So just trying to understand can you give us some more color here, how do the mechanics work of what's going on.
Speaker Change: Maybe you could tell us why this would've been a surprise and what periods do they relate to us at all 2024, and then my actual question is more on ebay growth.
Speaker Change: Curious what you saw a door to AEP both in terms of what proportion of your 8% growth expectation do you expect to come from AEP and then do you still see industry growth in mid single digits. Thanks.
Justin Lake: Hey, Justin Thanks, so much for the question.
Speaker Change: That was an impressive way a sneak into instead of wall I'll, let you get away with it because it just this time so Jonathan if you wouldn't mind, taking the first part of Justin Good question, and then I'm going to ask Bobby Hamzah.
Speaker Change: To tell you the second Bobby leads all of our businesses.
Speaker Change: Business in Medicare.
Speaker Change: Medicare So please go ahead.
Speaker Change: Justin Good morning.
Speaker Change: So yes in terms of those elements so.
Speaker Change: <unk> got a group customer refunds was one element of it.
Speaker Change: And certainly these are and there are a few other adjustments running through that were all put in the non run rate revenue impacts here.
Speaker Change: In terms of surprise or not so.
Speaker Change: Perhaps not anticipated a year ago, and we set out kind of in terms of our expectation for <unk>.
Speaker Change: Medical care ratio in revenues and such.
Speaker Change: Not a surprise in terms of where we've been the last.
Speaker Change: While though in terms of understanding these things because as they develop and you see okay better performance in certain group MA plans is good there is going to be there's going to be a refund that's given to those employers.
As we do as we're performing well and then some of the other elements I wouldn't call them.
Speaker Change: Surprised a certain relative to a year ago, we didn't have those incorporated in our view in terms of relative two.
Speaker Change: <unk>.
Speaker Change: Months ago. It would have been something we would have we would've understood and those elements and that was one of them I was trying to give an example, but there were a few and a total of up to that 80 to 90 basis points.
Speaker Change: Group, MA refunds being one of them.
Speaker Change: But I wouldn't call it a surprise to where our view has been the last.
Speaker Change: Last few months here on this and then well go to Tim.
Speaker Change: Tim.
Speaker Change: Bob.
Speaker Change: Yeah, Thanks, Jonathan and thanks, Joseph for the question.
Speaker Change: So in terms of AEP results, we're very pleased with how things played out for us, they're very much aligned to our expectations and it puts us on track to achieve the full year growth target of up to 800000 that we've communicated.
Really important to remember that with the selling changes for 2025, we do expect more than 50% of our full year growth to come in AEP.
Speaker Change: Also worth noting this level of growth is not something we're on familiar with and I'm really proud of our teams and the 100 readiness activities. We've executed on to ensure a smooth transition for our new and returning customers.
Speaker Change: The offer a few highlights on the growth itself seemed really balanced and diversified growth across our products and our geographies in particular, some really nice strength within our HMO and full dual plan offerings.
Also mentioned retention performing at near record levels I'm, a great Testament to the value that we're offering to consumers.
Speaker Change: And maybe lastly, you know of the members who have left us in prior years, we are seeing about three times as many returns that you would see this year as compared to last year I really view that as a testament to the service models and experiences we offer and folks clearly put a lot of value.
Speaker Change: And that when they are making their decisions and I'm really proud to see those individuals' coming back to us this year in terms of the growth rate.
Certainly still continue to believe in our long term growth rate of 7%, 9% acknowledging that in certain years, you can see fluctuations based on benefit changes and other factors. Some of that was present in 2024 and similar dynamics will play out here in 2025. So we expect 25 to generally pace in la.
Speaker Change: <unk> with 24 from a growth standpoint that said more confident than ever and the value that <unk> offers to consumers and.
Speaker Change: And the path that we're on for MA surpassed 70% penetration over time.
Speaker Change: Thanks, so much and I just wanted to acknowledge Bobby personally you can see over the last couple of years. He has really led to strategize on how to navigate through the very many external changes, which have played out through the 28 am alike.
Speaker Change: You've always heard us talk about playing a multi year strategy here and I think thats really coming to fruition Bobby owns a ton of credit associated with that and I'm delighted to see that reflected in the growth performance in the cycle. We're in right now that you've just described and it's that mix improvement that you just heard.
Speaker Change: In Bobby's answer, which completely differentiates 2025 from 2024 for Unitedhealth Guy is super important and all of those elements. You. Just described are essentially what makes up that very important mix improvement, which we've been aiming for and we feel very very good about it.
Let me go to the next question please.
Speaker Change: We'll go next to Atlanta, <unk> with Bernstein.
Speaker Change: Great. Thanks, so much.
Speaker Change: Really appreciate your comments at the beginning of the call.
Speaker Change: Could you talk a little bit about one of the things I think it was a hangover long term investors out there, which is levels of customer satisfaction I know that's difficult to measure, but I know, India. So are there metrics or things you guys look at can you talk a little bit about what you perceive to be the major sources of dissatisfaction.
Speaker Change: And those sorts of measures and then what are your some of your strategies and priorities and does it have any impact on long term.
Speaker Change: Algorithms for the company as far as economic algorithms growth out rooms, or just where you where you prioritize your capabilities. Thanks.
Speaker Change: Thanks, so much for the question.
Speaker Change: Listen I mean at the core of the company and if you look at the mission of the company. It's all about trying to improve the health system for everybody I'm by that it means not just reducing the cost of that making it more affordable, but it's also about trying to make it easier to access less complex less confusing and as I said in my opening comments we recognize.
Speaker Change: There's still a lot of work to be done in that regard.
Speaker Change: Some of the areas like you know, obviously claims wet where people get frustrated about how long it takes for a claim to process or maybe some confusion that goes on in that.
Speaker Change: Those are key areas for us to continue to work hard to improve and I can tell you, though when you look across claims less than half of 1% of claims are ultimately rejected for clinical reason because for whatever reason they are not deemed to be safe or effective treatment option.
Speaker Change: We all know there are other claims which get held up in the process before you get to that stage now the overwhelming majority of those claims which have held up a held up because they were either sent to the wrong company that didn't have the right information on them. The patient didn't have the right benefits all of those things now that could all be dealt with through technology and a more standard.
Speaker Change: <unk> approach across the industry and I'm very very pleased to say.
That we are we are experiencing and engaged with a a much heightened energy across the organization to solve this across the whole sector for everybody.
And in my view, probably 85 or more percent of all of those claims which end up going to the wrong place and then having to be resubmitted. It could all be avoided with the adoption of real time processing, a standardized approach to standardizing type mechanism. That's a key area for us to focus on and that we've alluded to that I mentioned.
Speaker Change: We are very.
Speaker Change: We're very close to around our Medicare advantage improvement. That's just one of the first steps and all of this is very much in line with the work that Brian frankly led over the last several years to really reduce overall activity around <unk> and the like and the company will continue to do that but I just wanted to emphasize the critics.
Speaker Change: <unk> of collaboration here to try and designed not just for one company, but for all companies not just for one patient but for all patients. That's what we got to work toward really looking forward to opportunities to engage with the administration on this because they can also be an important a to help capitalize those sorts of changes.
Speaker Change: The second area of <unk>.
Speaker Change: Consumer improvement opportunity, where I believe we are but we really are making great progress is just around that consumer experience. So there's no reason in the world why engaging with the health care system should feel any different or any less easy than any other work any other engagement you have in your life.
Speaker Change: And that's why we've been focused over the last several years on this move towards a consumer.
Speaker Change: B K.
Speaker Change: Capability for the whole company and not I really believe we're making breakthroughs in terms of how we're operating if you just look.
Speaker Change: One one of this year. So January of this year and you just look at a couple of of examples all UHC mobile App visits were up 66% year over year. That's another record year of growth UHC App remains the number one health care App in the Google and Apple App stores across the whole of Unitedhealth care or <unk>.
Speaker Change: <unk> are choosing to increase their digital engagement with us by about a third a year. So the app is two thirds up everything across the whole of UHC is up by about a third.
Speaker Change: Our app registrations are up nearly 100% year over year. This is this is us move into where American consumers want to be they want to talk to us digitally they want to use the phone.
To be able to access out they don't want to make a phone call.
Speaker Change: It's been an extraordinary shift we continue to work that way through we're able to talk to members now about 10% less every year of our members are making phone calls, they're getting what they need without needing to pick up the phone and make the call. All of those are fantastic metrics. You go talk Tomorrow X. The other big consumer engagement point, the most common interaction points.
Speaker Change: Cross American healthcare and pharmacy.
Speaker Change: If you look at the first of January you heard already today from John We enrolled 750, new clients. They represented $1 6 million New American consumers, who are now using optum Rx we're privileged to serve those people we were able to bring them on board a third less cost than in the prior year that isn't.
Speaker Change: <unk> due to the adoption of digital technology and other modern capabilities.
Speaker Change: Our digital engagement registrations across Optum Rx themselves are up 16%. Those are all examples of how this company has been investing relentlessly.
Speaker Change: First and foremost to understand what American consumers once and then build it and.
Speaker Change: And we are committed to continuing to build those capabilities and deliver the very best most convenient experience possible not just in the insurance business, but also in the Optum service business led by up Tomorrow.
Speaker Change: We're going we're committed to this agenda Lance we always have been and you should continue to see us make substantial improvements to make the experience of engaging with the health care system easier tomorrow than it was yesterday I. Appreciate the question next question.
Speaker Change: We'll go next to David Windley with Jefferies.
David Windley: Thank you for taking my questions and Andrew Thank you don't want to want to.
Give you kudos for your emphasis on price I feel like that's underappreciated in the United States. My question is around SG&A.
David Windley: Hi, extracts if I ignore the portfolio changes the way you might call normal course, SG&A improvement efficiency improvement in 'twenty four we're still substantial.
David Windley: You need another step down in 2025 per.
David Windley: From your guidance both of those are significant relative to historical norms.
Speaker Change: You talk about the sources of that efficiency, perhaps a nod to AI and some of the technology that you've talked about but the sources of those savings and the durability of the savings that you are extracting thank you.
Speaker Change: Yeah, David Thanks, so much I'm going to ask John to give you a kind of overview and then I'm going to ask our Chief Technology Officer to give you a little a few examples a little a little insight into.
Speaker Change: Our ambitious model I'm going to call it modernization agenda with technology, because it's not just AI. It's all of the different aspects, but I think it would be good for you to hear from Sandy, but John would you mind starting off.
Speaker Change: Morning, David So the source of those savings along the lines of the commentary that Andrew was offering a few moments ago.
Sandy: Led by digital adoption. So we serve roughly almost a 150 million people across the breadth of of Unitedhealth group and as we seek to make those experiences smoother simpler faster.
Sandy: That's being led by digital adoption, that's being led by.
Sandy: Having our customer service representatives much more informed when they do pick up the phone and if the customer needs to call much deeper insight into frustration or any kind of experienced the customer may be having or had so they can get to the root cause much more quickly so you're seeing those elements just accelerate.
Sandy: Look I said it a little bit in my commentary it feels very early stage to us in terms of what we're actually doing here and as I work with the technology teams and deepen the teams and what they're heading here. These are.
Sandy: We're just kind of scratching the surface of the opportunity. So when you ask about important questions about durability Super early stage in terms of what we see as the opportunity I would tell you. This what we're doing right now feel like I'm just kind of the initial.
Sandy: Scratching the surface that we'd be doing in terms of where we could where we believe we can take this and the opportunities that we're seeing so one of the things. We're most excited about the team I think we sit together and we think about the experience that consumers are going to have.
Speaker Change: How we're going to be able to make these up much smoother simpler and satisfying for everyone, including our employees, who work with work with our customers and Sandeep, maybe you could offer a few comments sure. Thank you John and thanks, David for the question our AI digital.
Sandeep: Automation and in general our modernization agenda is focused largely on removing administrative.
Sandeep: Menial tasks in the system and improving consumer experiences.
Sandeep: Some examples earlier that you have noticed has been around our call center efforts.
Speaker Change: Andrew just mentioned, we received 10% less calls for the same consumer base compared to last year, and we haven't even scared as fully by the end of 2025, we will be scaling this fully and that's one of hundreds of use cases that we are scaling last quarter, we talked about clinical somebody's for nurses that helps our nurses.
Speaker Change: Focus on healthcare and Thats getting scaled fully as we focus in 2025, we actually are excited about more compelling consumer experiences, helping providers and clinicians with documentation and somebody's and frankly digitizing all the paperwork in the entire health care experience things benefit.
Documents facilities provider contract, helping drive much more automated seamless frictionless claims processing as well.
Speaker Change: Cited about the agenda. Thank you Sunday. Thanks, so much David I. Appreciate the question if we could move on to the next question. Please.
Scott Fidel: We'll go next to Scott Fidel with Stephens.
Scott Fidel: Hi, Thanks, good morning.
Speaker Change: I was hoping just given some of the.
Speaker Change: Unusual patterns that we saw in 'twenty four and that then will have effects on 2025, I'm thinking about the sequencing of Medicaid.
Speaker Change: Margins in the MLR and some of the utilization patterns.
Speaker Change: If you would help us maybe I'm thinking about.
Speaker Change: Any any comments on EPS seasonality.
Speaker Change: That may be different in 2025 relative to 'twenty four and then similarly.
Speaker Change: MLR sequencing that that you're thinking maybe having a bit of a different pattern.
Speaker Change: Around that guidance that you gave for the full year.
Speaker Change: Scott Thanks, so much John.
Scott Fidel: Scott So I'd say in terms of seasonality.
Scott Fidel: First half second half think of that as relatively balanced in terms of in terms of seasonality.
Scott Fidel: For the earnings progression.
Scott Fidel: In terms of our medical care ratio and thinking about kind of those elements you startup.
Scott Fidel: First of course with the view that at the midpoint full year care ratio will be 86, 5%. So as we noted earlier about 100 basis points above the elevated 24 level.
Scott Fidel: And I just had discussed 24 that included a number of discrete items.
Scott Fidel:
Scott Fidel: Within that.
Scott Fidel: The quarterly pattern will look familiar with the first quarter below the midpoint of that but that in the fourth quarter above the midpoint not trending up to the middle of the year.
Scott Fidel: And then within the year the pattern familiar.
Scott Fidel: So those would be the elements, we kind of think about is that is that is that pat patterns through.
Scott Fidel: Slope, a little impacted of course by some of the part D changes that are out there also.
John: I think youre well aware of already because those have been out for a while so the slope of the slope of that will be impacted a bit by that also those would be the key elements great. John. Thanks. So much appreciate it our next question.
Speaker Change: We'll go next to Sarah James with Cantor Fitzgerald.
Sarah James: Thank you I'll stick on MLR, John could you help us bridge.
Sarah James: 24 to 25 by sizing some of the impact of the components that you've called out like your assumptions on core trends versus IRI and any offsets like rates are a non repeat of the Ma.
Sarah James: Thanks.
Sarah James: Yeah, Good morning, Sarah.
Speaker Change: Certainly so kind of big elements that we'd call out here certainly the the IRI impacts.
Speaker Change: The mix of our the people, we're serving we're serving more people in public sector plans of course, that's kind of a normal course element then.
Speaker Change: And then of course.
Speaker Change: Second year of the.
Speaker Change: CMS funding rate reductions here.
Speaker Change: Yeah.
Speaker Change: Elements kind of.
Speaker Change: It's probably going the other direction here would be.
Speaker Change: Certainly.
The cyber in South America impacts, we had size those you'll think about that as about 30 basis points in art and our 2024.
Speaker Change: Some of the trend affordability and other initiatives that.
Speaker Change: That we have in there also and then as I mentioned also just taking a appropriately respectful view of the of the care activity environment as we as we step out alright. Thanks, So much John I would just have time for one last question operator.
Speaker Change: We'll go next to Joanna <unk> with Bank of America.
Joanna: Hey, good morning, Thanks for squeezing me so.
Speaker Change: I guess something that maybe didn't come up.
Speaker Change: And the allowance for about I would say the outlook quickly.
Speaker Change: Can you talk about the margins in your Medicare advantage business.
Speaker Change: Second year will be 28, and such that just kind of looking at Stanford.
Speaker Change: The margin in that particular business, where I think going forward versus your target margins and do you expect the margins to improve year over year 25. Thank you.
Speaker Change: Hi, Joanne Thanks, so much let me ask Tim Knoll to respond to that.
Speaker Change: Thanks, Joanna for the question.
Speaker Change: As we think about our long term planning approach to Medicare advantage.
We remain consistent in our view of targeted margins in.
Speaker Change: And that doesn't change as we're thinking about 25.
Speaker Change: Like any other year.
Speaker Change: Which is good because then as we think about our forward view and any sequential year not a lot of pricing catch up that we need to engage in and can really focus on stability for people. The people, we serve and the prospects who may want to choose us in the future. So really not a lot of not a lot of change here are very consistent with how we.
Speaker Change: Thought about it previously.
Speaker Change: Thanks, so much and Joanna thanks, so much for the question. Unfortunately, that's all the time, we have this morning.
Speaker Change: I want to thank you all for a robust and productive discussion I hope it during our session. Today you heard the team is very focused on both effectively navigating the challenges and distinct growth opportunities ahead for United Health Group.
Speaker Change: Team, leading an enterprise with the capabilities and energy to help each day to make health care better for the people we are privileged and proud to serve thanks. So much for your time.
Speaker Change: This does concludes today's conference we thank you for your participation.
Speaker Change: [music].