United Health 3Q14 Earnings Call Notes

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This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Some thoughts on positioning on exchanges

“we are targeting profitability in 2015 probably a little bit lower than that 3% to 5% long-term range that we’ve talked about, but still profitable and from what we know today we feel pretty good about where we’re positioned in many of the exchanges, particularly the larger states where we expect to grow the most. New York, I would say nothing’s changed much in New York from the competitive environment that we’re in the middle of this year”

Not seeing much change in medical cost trends

“We continue to see medical cost trends and inflation going forward and we position ourselves and price accordingly. All of that is completely consistent with the way we have approached the business for the last several years, no different, and we don’t plan on changing that in 2015.”

We expected higher utilization in the medicaid expansion population than we’ve seen

“We expected higher utilization in the expansion population. In almost every case, we got paid for that higher expectation of cost and that’s what we’ve seen. So we expect long term for the population to perform in that 3% to 5% margin and are very confident about the continued growth.”

Optum’s growth really stood out this quarter

“I think in the third quarter you saw that OptumHealth went to a 14% top-line growth and 16% bottom-line growth year over year, you also saw that the Optum Insight went 4% up on the top line and 6% up on the bottom line. So what you’re starting to see is what we said would happen during the year, that our investments are starting to tail off and as a result really our outcomes are starting to kick in”

Utilization patterns pretty stable

“I think some of the other things that are probably contributing to the performance and utilizations, certainly some greater consumer responsibility and higher concentrations of value-based reimbursement. And again, those are things that are a significant focus of our enterprise, so overall, very stable utilization pattern”

We expect to earn a profit on exchanges without subsidy, but it’s an evolving marketplace

” We see this market as a really good growth, long-term growth opportunity. As we said in the last several calls, we don’t expect to rely on subsidies as part of that, and we are pricing to profitability. But in any new market, as you enter a market, we don’t necessarily think that will see our 3% to 5% earnings range in the first year. And again, remember, 75% of this market is yet to develop, and we are seeing it firm and stabilize a little bit, but it’s still only the second year in the market. But overall, we went into this market with an expectation of earning a profit in it.’

We don’t expect to see a lot of dumping from small employers

” let me deal with your question on small employer dumping. We have not seen a lot of that. We don’t really expect an acceleration in that given how reform has played out some of the offerings that are in the marketplace. So I don’t expect any significant increase in dumping, although we do expect some decline in the market which has been happening over time but not a significant dumping.”