A UnitedHealth Group Inc. storefront in Queens. (Photo: Michael Nagle/BB)

UnitedHealth Group today became the first publicly traded life and health insurer to post earnings for the second quarter, and its executives had to rush to explain that earnings for the next few quarters could look a lot different.

The COVID-19 pandemic caused the Minnetonka, Minnesota-based company's net income to double, to close to $6 billion.

UnitedHealth offers pharmacy benefit manager services, data services, health care services and other services as well as health coverage.

COVID-19 forced many doctors and hospitals to suspend or limit normal operations from about mid-March to the end of May.

That caused a sharp drop in volume at UnitedHealth units that provide health care or health care support services on a fee-for-service basis. The company was trying to protect its own workers by having many continue to work from home.

But the COVID-19 quarantine efforts also led to a sharp decrease in health care claim costs.

David Wichmann, UnitedHealth's chief executive officer, said, during a conference call the company held to go over the results with securities analysts, that the results show the value of the company's efforts to create an adaptable enterprise.

"We've witnessed our people helping in ways and advancing innovations and solutions at an unprecedented pace, scope and scale," Wichmann said.

Links to UnitedHealth earnings documents and conference call recordings are available here.

UnitedHealth has waived all COVID-19-related diagnostic and treatment costs, provided over $1.5 billion in emergency assistance for consumers, provided $2 billion in accelerated payments for health care providers, and penciled in plans to make $1 billion in premium rebates, and it's also helped state governments and employers set up about 500 COVID-19 testing sites, Wichmann said.

Earnings

UnitedHealth also made money.

The company is reporting $6.7 billion in net income for the second quarter on $62 billion in revenue, up from $3.4 billion in net income on $61 billion in revenue for the second quarter of 2019.

The company's UnitedHealthcare health insurance unit is reporting $7.1 billion in operating earnings for the quarter on $49.1 billion in revenue, compared with $2.6 billion in operating earnings on $48.6 billion in revenue for the year-earlier quarter.

Wichmann emphasized that the company expects health care claims to rise, and UnitedHealth's profit margin to narrow, as use of care starts to return to normal levels.

Enrollment

The second quarter ended June 30.

UnitedHealth ended the quarter providing or administering health coverage for about 48 million people, down from about 49 million people a year earlier.

Here's what happened to the number of people with key types of UnitedHealth health coverage between the end of the second quarter of 2019 and the end of the latest quarter:

Risk-based: 8.1 million (down from 8.3 million)
Fee-based: 18.7 million (down from 19.1 million)
TOTAL COMMERCIAL: 26.8 million (down from 27.4 million)
Medicare Advantage: 5.6 million (up from 5.2 million)
Medicaid: 6.2 million (down from 6.4 million)
Medicare Supplement (Standardized): 4.45 million (down from 4.5 million)
TOTAL PUBLIC AND SENIOR: 16.3 million (up from 16 million)
TOTAL DOMESTIC MEDICAL: 43 million (down from 43.5 million)
International: 5.4 million (down from 6.1 million)
WORLDWIDE TOTAL: 48.4 million (down from 49.5 million)

The conference call

Here are five things UnitedHealth executives said about the quarter during the company's earnings call.

1. Enrollment

At this point, Wichmann said, commercial health plan enrollment has been reasonably stable.

Employers have been continuing health coverage for many furloughed workers, Wichmann said.

When stimulus efforts end, the pandemic could have a bigger effect on employer health plan enrollment, Wichmann said.

2. The cost of care

UnitedHealth executives noted that enrollees' use of health care increased to about 95% of normal levels in June, from just 60% in April.

At this point, executives said, they worry that pent-up demand for care, and health problems caused or aggravated delays in use of preventive and routine care, could lead to a big increase in claim costs in the second half of the year.

3. Rebates

UnitedHealth is already planning to pay out at least $1 billion in premium rebates to its customers for 2020 coverage.

Wichmann said UnitedHealth will find a way to respond, through rebates or other mechanisms, if claim costs run unusually low throughout all of 2020.

UnitedHealth is already using waivers of the usual cost-sharing rules and some other rules to help the enrollees, and it's already talking with state insurance regulators about how to return excess premium revenue, Wichmann said.

"Obviously it's a lot easier to give money back than it is to ask for new, and so they've been very receptive and very collaborative and extremely appreciative that we were as proactive as we were and as early as we were in providing needed relief to our commercial members, as well as the actions that we took on the Medicare front," Wichmann said.

4. 2021

Bill Golden, the head of the company's commercial employer and individual health coverage unit, said the company is factoring a rebound in care use and costs into 2021 prices, but he also said that, "Our clients are really expecting and appreciating consistent and stable pricing from us."

Dirk Mahon, head of UnitedHealth's UnitedHealthcare health insurance unit, said the national accounts health coverage selling season is about 60 days behind where it would normally be in mid-July.

The company expects to have about as many national health plan accounts in 2021 as it has this year, but, "really, the tale is going to be told with respect to national accounts as to what attrition occurs throughout the remainder of the year," Mahon said.

Wichmann said UnitedHealth is not yet ready to talk about what earnings might be like in 2021, or, in detail, about how individual company units are performing now.

"Given the volatility of the market as it stands right now, and, more, the near-term focus that we have in making sure that we're serving our patients, members, customers, and then keeping our people safe, including 120,000 clinical resources out on the front line of care, we're just not really in a position to talk about 2021," Wichmann said.

UnitedHealth might be in a better position to talk about 2021 in about three months, Wichmann said.

Wichmann added that UnitedHealth is not making predictions about the business units' future performance anymore "because there is nothing normal about how any of them are performing at this stage."

"Collectively, they're doing a great job and they're right on expectations, and they're right on the expectations that informed the guidance that we gave you back in December, maybe a little bit ahead," Wichmann said. "So they're performing really well, I just don't think at this time it's the right time for us to be thinking about where we'll land in 2021 on margins."

5. Health care reform now

Wichmann, UnitedHealth's CEO, noted that a UnitedHealth unit will be participating in Washington state's new public option program and sees that as an interesting test of how the company's plans will perform in that kind of arrangement.

But Wichmann said UnitedHealth believes many public option proposals would disrupt current U.S. health care delivery arrangements too much to be popular with typical consumers.

"We believe there's a near universal coverage system already in America today," Wichmann said. "It's obviously not complete and it has some gaps, but we believe those gaps can be closed and think that consumers much prefer that we leverage the existing commercial Medicare and Medicaid markets to provide the types of coverage options and coverages that are necessary for America."

One way to improve Americans' access to health coverage, and health care, would be to adopt the Affordable Care Act Medicaid expansion program in states that have not adopted it, Wichmann said.

Another good approach might be to move to an automatic enrollment system for Medicaid and similar programs, Wichmann said.

"We see a lot of the uninsured are actually folks that have an affordable coverage option available to them, but they don't necessarily enroll," Wichmann said.

About 8.5 million of the uninsured people are people who are already eligible for Medicaid, Wichmann said.

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