UnitedHealth 1Q14 Earnings Call Notes

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A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.

This is the first full quarter under ACA

” This is was really the first quarter a full scale operation under the ACA. Everything else in the past three years has been more of a preamble.”

ACA’s impacts have been significant

“The ACA’s impacts on 2014 had been immediate and significant as we described at our Investor’s conference. Nondeductible insurance taxes, ACA prescribed Medicare Advantage funding pull backs, commercial underwriting changes and various other provisions cumulatively reduced our per share, net earnings by nearly $0.30 for this quarter and sequestration cut an additional $0.05 in this quarter.”

ACA distorts comparability

“The ACA impacts every major line item of our consolidated results and distorts comparisons virtually all performance ratio. This will continue as the year’s progresses, a new regulatory and tax baselines are established and settled in”

Nearly 400k new medicaid lives

“Let’s review, how this played out in the first quarter for UnitedHealth Group starting with UnitedHealthcare, whose revenues grew $1 billion or 3.6% year-over-year to $29.3 billion led by membership growth in Medicaid. Over the past 12 months alone, UnitedHealthcare has implemented six new or renewed Medicaid contracts and grown to serve 395,000 new members.”

Medicare advantage flat to down, planned exits due to funding cutbacks

“Medicare Advantage program was essentially flat down 5,000 people sequentially and well within the range we expected, despite significant market exists and products network adjustments made in response to the 2014 Medicare Advantage rate cuts of more than 6%.”

Individual coverage declined sharply

“Commercial membership also began the year generally in line with our expectation with a sharp decrease in people served through fee-based relationship as well as some expected declined in risk-based business. As expect our individual policy business declined this quarter as we decrease by 90,000 with the advent of the ACA.”

Some unsustainable price competition in small business markets

“Over the last quarter, we have seen intensified pricing in several markets including small group in New York, a large market for us. We believe several carriers there including new entrants are pricing well below cost and what we would view as unsustainable pricing levels.”

Medical costs still inflating

“We continued to project a 6% commercial medical cost trend plus or minus 50 basis points for 2014.”

Lots more Americans UNH doesn’t serve

“UnitedHealth Group faces an expansive long-term growth opportunity. In the US alone, there is the opportunity to approach and serve the more than 700, the Fortune 1,000 companies not yet our customers. Today we serve, more than 85 million people leaving more than 230 million Americans, we do not touch.”

The HepC treatments are effective but the costs need to be addressed

” I think as you mentioned first the hep C therapies as you know are very effective and one of the things that we are doing is working to ensure that appropriate clinical protocols and standards are in place, but as noted the price is exceptionally high and as Steve said in his opening comments that controversial and it’s putting a lot of pressure on States, CMS and in terms of our day as well as our employer sponsor, so the cost has to be addressed”

Exchanges still very early in life-cycle, we’re in the learning phase

“t is still very, very early in the life of the exchanges and second year in terms of how they will evolve, will be effectively somewhat by what I call, a lot of spontaneous change over the course of the first year implementation, which we understand that does require some consideration and calibration as we go”