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spk09: Good morning and welcome to the United Health Group third quarter 2020 earnings conference call. A question and answer session will follow United Health Group's prepared remarks. As a reminder, this call is being recorded. Here is some important introductory information. This call contains forward-looking statements under U.S. federal securities laws. These statements are subject to risks and uncertainty that could cause actual results to differ materially from historical experience or present expectations. A description of some of the risks and uncertainties can be found in the reports that we file with the Securities and Exchange Commission, including the cautionary statements included in our current and periodic filings. This call will also reference non-GAAP amounts. A reconciliation of the non-GAAP to GAAP amounts is available on the Financial and Owning Reports section of the company's investor relations page at www.unitedhealthgroup.com. After saving with customized car insurance from Liberty Mutual, I customize everything. Like Marco's backpack. Don't be late to the party. Virginia Connect makes managing referrals easy and it costs you nothing.
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spk09: I will now turn the comments over to the Chief Executive Officer of UnitedHealth Group, Mr. David Wickman. Please go ahead, sir.
spk07: Good morning, and thank you for joining us today. The past nine months have hopefully provided you a window into both the values and capabilities of this organization and how they enable us to serve our customers, patients, care providers, team members and their families, and you, our investors, in a period of unprecedented challenge. I'm fortunate to witness up close the exceptional work of our team every day, an innovative, growing, and highly adaptable enterprise driven by the compassion, expertise, and restless spirit of our 325,000 people, over 120,000 of them providing care on the front lines. Our collective experiences over this year have made us an even more deeply committed and energized organization about our potential to help advance the next generation health system. one which is fair, affordable, simpler, and effective. Our team combines the vision with sharp focus on day-to-day execution, delivering strong, well-balanced results across the enterprise. Third quarter adjusted earnings were $3.51 per share, with the decline from the year-ago quarter reflecting the swift customer and consumer support actions we committed to from the very beginning of the COVID-19 pandemic. Based upon this performance, and forward estimate of pandemic impacts, we are updating our full year 2020 adjusted earnings outlook to a range of $16.50 to $16.75 per share. In this, we remain committed to ensuring any financial imbalances arising from the pandemic are addressed proactively and fairly for those we serve. We have done this consistently over this period, even as the ultimate outcomes remain unclear. as the timeliness of relief to our stakeholders is critical. Service, fairness, and performance with a long-term view. This is what you can continue to expect from us. You should also expect this enterprise will apply its innovative spirit to contribute in new and different ways as our capabilities expand and circumstances require. We have partnered on and led clinical trials, helping resolve the nation's critical PPE and PCR supply chain issues and enabling more rapid testing at considerable scale while keeping the health workforce safe. We are supporting state testing operations in California, New Jersey, North Carolina, and Indiana, and contact tracing in New York City. We are supporting the Mayo Clinic's development of convalescent plasma and some of the most promising vaccine and antibody trials. We have helped enable workforce safety through the development of ProtectWell, a protocol processing technology to enable the safety of the health workforce, as well as the safe opening of businesses, schools, and nursing homes. We're working to assist with employees' health coverage transitions through our Get Covered campaign, now being offered by employers to assist people who have lost their jobs. We provided $2 billion in liquidity relief for the health system And our customers and consumers will realize over $3 billion in premium and cost sharing relief, including $1 billion in estimated rebates. We have contributed more than $100 million of financial support and 6 million pounds of meals for communities suffering from food insecurity, homelessness, and health disparities. These efforts are possible because we operate a capable set of businesses and capacities that are leading the development of the next generation health system and expanding our opportunities to serve. Today, I'd like to give you a brief sense of this work. Early in the pandemic, we quickly enabled opt-in physicians and the physicians of UnitedHealthcare's most vulnerable patients to adapt and expand rapidly to meet the needs of millions of patients for care of chronic and emerging conditions. This included advancing telehealth by creating direct connections between patients and their own physicians, a critical element to highly effective digital health, ensuring adoption will extend well beyond this crisis. So far this year, OptumCare physicians have facilitated 1 million digital clinical visits directly with their patients. And we are rapidly developing a proprietary set of distinctive tools and aligning our clinical practices to further develop and amplify this capability. I'm sure you can see how advancing modern telehealth fits into our overall strategy to build high-performing systems of care. Our growing therapeutic capacities are positively impacting the management of chronic diseases. With the introduction of Level 2, a digital therapy developed to improve the lives of the 30 million people with type 2 diabetes, we are helping patients move toward remission of the disease. Level 2 uniquely measures signals and applies artificial intelligence, engaging people and producing better health outcomes. You can expect more digital therapeutics from us in the coming months and years. Our growing capacities are especially apparent within our OptumCare platform, where 53,000 physicians across 1,500 local patient-centered facilities serve nearly 20 million patients, over 3.5 million of these in some form of risk arrangements, with 1.3 million Medicare Advantage or dually eligible members under global capitation. OptumCare creates substantial value by building a deeper clinician-patient relationship and by leveraging data and artificial intelligence to enable our clinical model to intercept and treat disease early and proactively, leading to better health outcomes, value, and industry-leading patient experiences. Our patients are experienced safer, healthier, more fulfilling lifestyles, spending one-third fewer days per year on average in a hospital bed, and 40% fewer days in a skilled nursing facility than patients supported by traditional Medicare fee-for-service. Moreover, our most advanced care delivery practices deliver this high-quality care at upwards of a 40% lower cost than the equivalent traditional Medicare benefits, with the value fully reflected in improved benefits and lower costs for seniors, all at world-class NPS scores in the mid-70s.
spk12: I know that these are scary times for investors. The headlines that you read over and over again or you see on the nightly news talk about war, recession, and the reality of inflation. So as an investor, I wanted to take these one by one and address them in the context of given today's headlines, what's an investor to do? And how are you to stay focused on the future? You know, when you originally define and create your portfolio, I'm sure you had conversations about volatility with your advisor slash coach. The reality is talking about inflation and having to live through it, talking about war and having to live through it, talking about recessions and having to actually live through it and not panic are two different things. Nothing is more unsettling, I believe, than the prospect of war for investors. And we all know that there is a war going on in Europe with Russia attacking without provocation a fellow nation, Ukraine. And we see it every single day, the horrendous and terrible realities of the massacres that are going on in that country and their ability to try to defend themselves against Putin. But what's that mean to your portfolio? As horrific as it is, it would be a mistake if you equated the fighting in Ukraine with an absolute certainty that the market is going down. Why is that the case? Well, markets are efficient, meaning that they're forward-looking, meaning that all the knowable and predictable information about the future is factored into prices today. Therefore, only unknowable and unpredictable information going forward will affect prices. Let me give you an extreme example. Let's go back in history almost 80 years ago to World War II. If you had known in advance all the headlines, if you had a crystal ball, and you knew how terrible and destructive and painful and the loss of life, property, liberty and destruction, what would you have guessed the markets would have done? I'm going to say that you would have guessed almost certainly that markets would have gone down. In reality, if we look at the S&P during this whole period of time, from 9-1-1939 to 8-31-1945, we see that the U.S. market, as measured by the S&P, was up over 12% per year. If we look at all the stocks available on the U.S. market, as measured by the CRISP Index, which stands for Center for Research and Security Pricing at the University of Chicago, nearly 13% per year during this horrendous time. So there's one thing that I want you to remember moving forward. No one can tell you, and this doesn't matter if there's war or other factors, extenuating factors, circumstances about life. No one can tell you where the next 20% movement in the U.S. market is going to be. And if they are, they're either delusional or they're trying to mislead you on purpose. No one can tell you where the next 20% is going to be. But what we do know is historically, the next 100% of the market is up. And it's been that way through wars, recessions, depressions, external threats and internal threats. Someone asked me just the other day, what would happen if there was war and attacks on our own country inside of our own borders? To which I answered, that's already happened. It happened on 9-11. Our country was under attack by terrorists. So even that's already happened. And we know with retrospect that after this horrendous event, that America went on the aggressive and that we actually caught many of the terrorists that perpetrated this heinous crime against us. Markets recovered. But what about Pearl Harbor? If I go back and I look at Pearl Harbor, if I look at, for example, 12-1-1941 after Pearl Harbor to 8-31-1945 after America entered World War II, we can see that the annualized rate of return, get this now, the annualized rate of return of 21.8% annualized per year for the S&P. If I look at the CRISP index, 21%, 21.18% during that period of time. So here's the bottom line. As afraid as you might be, no one can tell you anything specifically about the outcome of this war. Many people will speculate. But as an investor planning for your retirement and planning for your family's dreams, It is critical to take the long view and to focus on what you can control, which is your discipline and your courage over time and your dedication to your design of your academically tested portfolio. And then somehow, I know it's not easy, somehow let go of the things that you can't control. If you look at throughout your own life and through history itself, you'll see that it didn't come to stay, it actually came to pass. And this too shall pass in time. It will be the investors that stay disciplined and have the courage and the fortuitousness not to panic. You know, as an investor, it is never the right time to panic. And if equity prices do go lower, as they tend to do over time, we know that historically investors who stayed disciplined and sold off their fixed income while it's high and bought more equities while it was low had a longer term expected return. Why? Because when markets are lower and there is fear in the market or fear in the world itself, equities go lower to price in a higher long-term premium. So the people that are smart enough, brave enough, and wise enough to actually buy things when they're down historically fare much better than the people that panic when they drop. But we're not dealing with just war. We're also dealing with recessions. And it would be easy to think we have right now is of this filming, this taping of this. We have two quarters in a row of negative returns. Our last quarter was negative one point four percent in the United States for the restriction, the contraction, if you will, of the U.S. market. And if we do hit one more quarter, it will be officially a recession. What's history tell us about recession? It would be easy as an investor to think that there was a high correlation about recessions and negative or down markets. But a student of markets and a student of history will actually see that markets tend to go down before the recession and often actually go up in the middle of a recession. So there appears to be little to no correlation between a recession and what the markets are doing in that period in which the economy is actually contracting. It would be nice to know, wouldn't it, when there was going to be a recession or when there was going to be a depression or when there was going to be economic turmoil. We can look throughout history. This company has been in existence since 1991, and we've seen three major impacts here. that investors who were courageous and patient and disciplined in the end prevailed. The first of these was the dot-com crash. The year was 2000, over 20 years ago. And the S&P and large stocks had made unbelievable rates of returns from 1995 to 2000. The S&P had made in the ballpark of 22% a year. NASDAQ type stocks made 45% a year for five years in a row, and everyone was feeling bulletproof. What happened after that was a terrible debacle. US stocks, US large stocks dropped over 50% and NASDAQ stocks would drop over 75%. And then what would ensue would be what many people would call the dead decade, a decade in which large US stocks actually had negative returns over a full 10 year period. We've been telling investors, warning investors about the dangers of loading up on only one or two asset categories. And historically over the last year, we've seen them double down on both U.S. large stocks or S&P 500 stocks and NASDAQ type stocks. What's been the effect this year? Well, let's just say less than stellar results. The NASDAQ is down so far year to date. This filming is May 10th. As of yesterday, May 9th, the S&P was down 15% year to date. and the NASDAQ was down 25% year to date. Those same companies that seem bulletproof as of up to last year seem to lose over a quarter of their value in less than half a year. How do you protect yourself from that? The way that you protect yourself through that is diversification. You don't just own large stocks. You don't just own NASDAQ type stocks, the ones that tend to be in the news every day. you actually globally diversify and focus on owning both small and small value stocks to help reduce the risk and the uncertainty. For example, the NASDAQ is down 25% as of yesterday. But if I look at the Russell 1000, these are large US value stocks. They're only down 8% as of yesterday. If I look at international large value stocks, they're down only 8% versus the NASDAQ down at 25%. Diversification, global diversification is critical during these times. And what about inflation? So far year to date, inflation is clocked in, CPI at over 8.5%, the highest it's been in over four decades. It would be easy to see the triple threat of war, recession, and inflation as a warning sign to get out of the market. This would be a terrible mistake. It's called market time. And one thing academics show us over and over again, people tend to panic and sell things when they're low, and they tend to get greedy and want to buy things when they're high, which is the exact opposite of what academic study tells us to do. It actually tells us to sell those things that are relatively high, which right now are short-term, high-quality fixed income, and buy more of the things that are low through a rebalancing process. And that's exactly what we are going to do here at Mattson Money. Many of you are wondering or thinking, I'm afraid. What should I do about that? One thing I want you to know is that when you turn on the TV and you go to watch the news, cable news programs, they are not your friend. They are not there to educate you. They're not there to help you stay disciplined over time. They're not there to help you deal with fear or anxiety in a positive way. As a matter of fact, to a large extent, they exacerbate fear and anxiety because it's profitable for them. If you're focused on the terrible negative things in the world right now, then they will get more eyeballs and those eyeballs will end up creating more viewers and those viewers will create higher profits when they run ads for whatever products they're selling at that time. Don't fall for it. I know it's hard, but you want to focus on the positive. When everything's uncertain, anything is possible. And we've been through tough times before. If you remember Reagan and the Cold War, you'll remember Russia having taken over much more of Europe than it has today. But there are always brave, courageous people that are willing to stand up to evil, corrupt people. And I believe this is part of the human condition. If you're worried about inflation, historically, the best way to overcome inflation has been through owning equities. Historically, inflation has clocked in at about 3%, and the S&P, large U.S. stocks index, clocks in at about 10%. So you're looking at almost a 7% premium per year of real return over inflation. Small value stocks, historically, through all the data that we have, have shown up and clicked in at about 14% versus a 3% inflation rate. No one knows what those exact rates will be going forward, but if you're planning for your retirement and you're planning for those golden years and you're planning for all your dreams that you have, one thing's for sure, inflation will be something that you'll want to not only keep up with, but historically something that you would want to do better than. And so for investors concerned about inflation, equities provide an amazing hedge long-term against the risk of inflation. Every investor, big or small, must deal with one thing that no one else can deal with, and that is their own mindset. Because investing will never be easy. Investing may be one of the most difficult things you'll ever do because it entails being able to do a journey into self and recognizing when fear, instincts in blind spots, cause imprudent behavior that can actually destroy your dreams. I'm aware of all the negative things, headlines, and all the negative economic reports that are coming out today. And I still understand the economics and the academics of investing. In the long run, they're really quite simple. Own equities. Diversify and rebalance. Easy to say, hard to do. The human brain itself is not hardwired for these activities. As a matter of fact, our brain is very great at running away from saber-toothed tigers, but when the amygdala gets hijacked and gets lit up because of stress, anger, and fear, it's easy to overreact and do the wrong things. In nature, there's three responses, typical, when there's high degrees of anxiety, stress, and fear. Number one is to run. Number two is to fight. And number three is to actually play dead. When it comes to investing, every single one of these strategies are destructive. And that's why it's critical that you work with your coach. Your coach is your secret weapon. against your amygdala, your instincts and your emotions taking over and causing you to have destructive behaviors going forward. So understand that your portfolio was constructed. So no matter what set of circumstances, it would put you in the best position to maximize your returns for any given level of risk. And the portfolio was created without specifically a prediction about the future. Because that is the greatest folly of all. The reality is no one knows what will happen in the future. They don't know what the good things that will happen in the future. They definitely don't know what bad things will happen in the future. And the market has already factored all of that into the prices today. And I'll leave you with one example. thought that is comforting to me, and that is the indomitable nature of human beings. If you look throughout history, there have always been periods of chaos, fear, pain, and struggle, but they were always followed by peace, tranquility, bravery, and courage in the face of fear. And I am confident that given enough time, we will see the same outcome in this situation. Stay disciplined. Focus on what you can control. Meet with your coach. And whatever you do, don't panic. Thank you.
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spk07: The proven clinical success of opt-in senior care offerings supports our considerable growth goals for opt-in care and also demonstrates the longer-term potential to greatly benefit consumers in commercial offerings. We have been building this platform for over a decade now and expect it to continue to grow at strong double-digit rates for years to come. Another aspect of a modern next-generation health system is managing the specialized and costly medications of the future in a way which works for patients, clinicians, employers, and payers. Our OptumRx integrated specialty solution brings a total approach to managing complex conditions across both the medical and pharmacy benefits, where we are able to generate up to $37,000 in annual savings per patient. by employing clinically appropriate care at more convenient, lower-cost sites. This approach is enabled by Optum's growing footprint of integrated community pharmacies, which will grow by over 60 centers in 2020. And the number of patients served with our infusion services will grow at double-digit rates. We expect this to be another durable growth trend, given the much safer and clinically equivalent patient experience. We see OptumRx as continuing to transform to be a leader in pharmacy care services. Put differently, we believe the value for people and the system from pharmacy care services resides in managing personal engagement in health, not just supply chain management. This plays to our strengths and will increasingly contribute to the growth of OptumRx in the years ahead. UnitedHealthcare continues to focus on the varied needs of healthcare consumers. In the next generation health system, we expect consumer benefits to become increasingly customized to meet these needs as people search for solutions which are simple, affordable, and help enable quality outcomes. UnitedHealthcare has seen strong reception to our expanding suite of highly tailored and affordable individual coverages. This year alone, the number of people we serve with individual health coverage has grown by 15%. Likewise, in employer-sponsored coverage, our growing set of consumer-centered, innovative, and flexible offerings such as Bind, All Savers, and physician-aligned plans such as Harmony in Southern California are gaining traction, with membership in these offerings having grown over 50% this year. know many of you are interested in the annual medicare advantage enrollment period which opens tomorrow the 2021 benefit year will be united healthcare's largest medicare advantage footprint expansion in five years reaching an additional 3.2 million people in nearly 300 additional counties we are emphasizing what we know seniors are looking for this year even more than ever stability and value Premiums for most people we serve will be flat or reduced, and nearly 2.5 million people will have no premium at all. We continue to innovate our product offerings with all Medicare Advantage plans featuring zero copay primary care digital health visits and the expansion of our personal support services, such as an annual clinical health assessment delivered in a senior's home, and for many, the assignment of a dedicated UnitedHealthcare navigator. we expect strong growth in individual MA. And when combined with our group Medicare gains, 2021 is shaping up to be another year of market-leading growth. We also expect continued growth in Medicaid due to transitions in coverage and net new market gains, and are looking forward to a record RFP season as we seek to serve more people in more geographies. What I've described for you this morning is a sampling of the initiatives we are pursuing today to help lead in the development of the next generation health system, a health system that works better for everyone, those who experience care, those who provide care, and those who pay for care. Now I'll turn it over to Chief Financial Officer John Rex.
spk08: Thank you, Dave. Broadly speaking, third quarter results continue to be impacted by disrupted care patterns, albeit to a much lesser extent than in the second quarter, as many regions of the country stabilize nearer to more normalized levels. Within the quarter, care deferral impacts were more than offset by the proactive consumer and customer assistance measures we voluntarily undertook earlier this year, as well as COVID-19 care and testing costs and broader economic effects. These factors resulted in a 10% year-over-year decline in adjusted earnings per share. As we discussed last quarter, the deepest period of care deferral which occurred in the second quarter and the timing of DAP recognition of our assistance actions don't entirely line up. which makes for a more pronounced adverse impact to earnings in the second half of 2020. The measures we voluntarily undertook mostly impact our benefits businesses and contribute to UnitedHealthcare's third quarter operating earnings decline from a year ago. In the quarter, we saw total care activity now exceeding 95% of seasonal baselines, with certain categories even more closely approaching normal. This compares to an overall measure of about two-thirds at the lowest point in the second quarter.
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spk08: Each of the three Optum businesses continued to perform well, while affected in different ways by still recovering care patterns and economic effects. Optum Health's third quarter earnings increased 12% year over year as fee-for-service practices and ambulatory surgery activity began to recover. While risk-bearing practices still experienced some modest continual effect from deferral of care. Our FDA ambulatory surgery centers operated at about 95% of seasonal baseline in the third quarter compared to 55% in the second quarter. Year to date, over 1000 new surgeons have performed procedures at FDA as they seek a safe, convenient and efficient clinical partner. New surgeon affiliations for the nine month period rose nearly 25% over last year. And we continue to expand the complexity of procedures performed in these settings, having added over 40 new service lines, nearly double last year. Patients increasingly prefer these resampling centers, with MPS measured at 92. These durable, long-term trends will benefit our growth even more strongly in the future, as elective care activity fully normalizes. OptumInsight third quarter earnings increased 24% year-over-year. while the revenue backlog grew by half a billion dollars in the quarter to nearly $20 billion. Payer services and state government businesses performed strongly, while we continue to see lower activity in the provider-facing businesses due to procedural volumes. While still not fully normalized, business development activity has increased from the second quarter's much lower pacing. Optimum Rx earnings declined 2% year-over-year in the third quarter, as script volumes were impacted by lower care activity and economic factors. First-fill scripts, which are correlated to physician visit activity, greatly improved from the second quarter, which was down about 25%. While not yet fully back to prior year levels, revenues in our expanding pharmacy services businesses have grown nearly 30% year-to-date. Turning to UnitedHealthcare, third quarter operating results reflect a considerable moderation of the care deferral impact experienced in the second quarter, while still not at baseline levels. This was more than offset by our assistance measures, direct COVID-19 care costs, and economic factors. The number of people served in commercial products declined primarily due to employer actions. Within this, for us, about 40% of the fee-based decline came from very large employers, primarily in the hospitality, transportation, and energy sectors. During the third quarter, growth in Medicaid membership accelerated, benefiting from the continued easing of state redetermination requirements. We have not yet seen material Medicaid enrollment activity due to job loss. Historically, these transitions lagged loss of health care coverage by about six months. Our Medicaid business has seen strong year-to-date organic growth of over 500,000 people. Sales activity in Medicare Advantage has continued to move toward more normalized patterns after seeing some slowing in the second quarter due to the pandemic. Within this, we have seen considerably less plan switching than typical for existing Medicare Advantage enrollees. While selection of MA over fee-for-service for people new to Medicare is tracking well, We continue to deepen our engagement with those seniors most in need, increasing the distribution of remote digital sensor kits to collect and monitor vital health data and address gaps in care generated by the pandemic. Seniors continue to highly value our House Calls program, with the number of home visits in the third quarter growing by nearly 30% over last year. Our liquidity and financial position remains strong. Third quarter cash flows of $3.1 billion, or one times net income, reflect the extra federal tax payment in the quarter due to the deferral of payments typically paid in the second quarter. Year-to-date cash flows from operations are $16.1 billion, or 1.2 times net earnings. And our debt-to-total capital ratio of 39.1% compares to 43.7% in the year-ago quarter. As noted earlier, we have updated our full-year adjusted earnings outlook to a range of $16.50 to $16.75 per share. This reflects third quarter performance, while anticipating the fourth quarter will reflect continued customer assistance measures, normalization in care patterns, and rising acuity as a result of missed and deferred treatment. We will continue to work proactively to help people obtain the care they need. Now I'll turn it back to Dave. Thank you, John.
spk07: With the third quarter earnings report, we have at times provided some early soundings on our growth outlook. Even as the current environment is anything but routine, I'll still try to offer some useful perspectives. We approach the future with continued conviction on our long-term 13% to 16% earnings growth objective. Some of the factors giving us confidence include our rapidly expanding care delivery services, now benefiting from over a decade of building and investing in local value-based care systems, and extension into market-leading post-acute, home, and modern behavioral health intervention services. Our ability to support seniors across multiple channels and markets with increasingly innovative, high-value offerings. The way we meet the growing needs of people with highly complex conditions with comprehensive, personalized care, including people across commercial, federal, and state-based programs. the innovative and consumer-responsive products now being offered through the employer and individual market channels, our unmatched ability to support a more interoperable and intelligent health system as a result of significant investments over many years to improve performance, integrating data, analytics, and clinical information to provide essential insights to evidence-based next best care actions, and our restless drive to allocate capital and align with other innovative companies as we lead in the development of the next generation health system in a socially conscious way. These are just a few of the accelerating capabilities which will enable our enterprise to serve more people much more deeply as we look to the years ahead. As to early thoughts on 2021, we expect our underlying business performance to be strong and well supportive of our long-term growth objectives, including the tailwinds we have highlighted throughout this morning. The pandemic and related economic impacts, of course, remain difficult to predict, and at this distance likely represent a significant potential headwind. As a result, we envisioned stepping out initially with a more conservative all-in 2021 starting point to accommodate these still developing and unknown COVID-related impacts, in particular, the pacing of a return to more normal levels of care services and the condition of the economy. As the environment continues to evolve, we will also continue to evolve our thinking and perspectives. And as is our custom, we look forward to providing you further perspectives on all aspects of our business and our investor conference on Tuesday, December 1st, which will be held virtually this year. Thank you for your time today. Operator, can you please open the line for questions?
spk09: And at this time, if you have a question or comment, please press star 1 on your touchtone phone. You may remove yourself from the queue by pressing the pound key. We do ask that you limit yourself to one question. If you ask multiple questions, we will only be answering the first question so we can respond to every one of the queue this morning. Thank you. We'll take our first question from AJ Rice with Credit Suisse. Please go ahead.
spk14: AJ Rice Hi, everybody. Maybe just to pursue a little bit further the comments that Dave just made about thinking about next year. I guess predicting the medical cost trend, you've got a lot of moving parts there, potential further deferrals, potential pent-up demand that could come back, costs of vaccines and therapies that could be there, a number of things, and thinking about the cost trend for next year. How are you approaching that? How do you see... a competitive environment that's changing as a result of that. Just maybe flesh that whole comment about how uncertain the ability to predict the medical cost trend is for next year.
spk07: Thank you, A.J. A very thoughtful question. Hopefully you took away from the prepared remarks that we're optimistic about the performance of our business. And that's pretty much universal across Optum and United Healthcare. We didn't get into some of the smaller sized businesses, but we're optimistic in particular about our relative competitive position and the growth prospects for 2021. But as also indicated, we remain deeply respectful of the environment, both the pandemic and related economic consequences. And one thing I've done to score AJ is what you hit very well. There are a number of moving parts which are very difficult to predict. And you should also know that we're extending our efforts to ensure that our chronic members and patients are getting the care that they need during this unprecedented time. And we also still have a strong commitment towards correcting any imbalances that could occur. So at this distance, we do see our underlying business performing strongly and aligned to our long-term growth objectives, which are 13% to 16% per year. per year, offset in part by these pandemic-related effects. So the starting point, as we indicated in December, will likely represent a wider range given the possible outcomes and a more conservative all-in expectation than normal that you would normally see from us given all the elements that you just described. So we're taking that into consideration as we develop you know, our points of view about where our MLR might land, what the variability of that might be. We see it, you know, generally speaking, that whole pandemic-related impact as being an area, a headwind for the organization. But don't misread it. We are very bullish on the strong underlying growth performance of our business. Thank you. Next question, please.
spk09: Okay, Trent. And the next question is from Josh Raskin with Nephron Research. Please go ahead.
spk17: Hi, thanks. Good morning. Just a question on OptumCare, I guess. And, you know, you're seeing big growth in the PMPMs there on the consumers served. And I just want to better understand, you know, the relative performance, sort of 3Q year-over-year versus 2Q, kind of what's driving that increase in revenue per member? You know, and then if you could also talk about sort of the position recruiting and how that's going, you know, over the last six months.
spk07: Sure. Josh, great question. And I think you're hitting on one of the strengths of the enterprise and one of the reasons why we're bullish on its growth for next year. Simply said, it would be more markets more deeply penetrated into those markets and a higher percentage of them having a risk-bearing arrangement. But Wyatt, do you want to talk more fully? Yeah, sure. Thanks, Josh, and thank you, Dave. I think, Dave, you captured it well. What we're seeing is as we grow, we not only have increased the number of members we serve to 98 million, but we've increased by 25% the revenue per member. And that's being driven in part by the more extensive services that we would offer somebody through a risk-based arrangement and opt-in fare. versus the lighter cuts that you might see through some of the other businesses within Austin Health. We expect that trend to continue and, frankly, are very excited about double-digit growth in our MA risk lives and related fully capitated lives that we serve. The other piece I'd say, Josh, around your question about position recruitment is we have seen continued robust interest in both small tuck-in acquisitions as well as medium and large physician groups who are attracted to both stability, the physician leadership, and the evidence-based approach that we've embraced in OptumCare. Thank you. Good question, Josh. Thank you. Next question, please.
spk09: We'll go next to Justin Lake with Wolf Research. Please go ahead.
spk15: Thanks. Good morning. I wanted to circle back to the comments on 2021. First, consensus has been around the 11% range for growth year-on-year. David, I know you said that the range is going to be wider than average this year. Wondering if you think expenses will fall within that range at any point. Nick, can you point us to the breadth of the business? Justin? More specific segments.
spk07: Justin, we're having a hard time hearing you. If you're on a headset, can you pick up a handset?
spk15: Sure. Is this better?
spk07: No. No.
spk15: No. Okay. Hold on a second. Okay. Is that better?
spk07: It is. Thank you.
spk15: Sorry about that. So what I wanted to do was circle back to the comments you made on 2021. First, incentives earnings growth, I think it appears to look like it's targeting around 11% year-over-year, so below your 13-16. Wondering if you think that might your wider than typical guidance still might include that consent assessment within the range. And then can you point us to the specific businesses where you're seeing, you know, the potential impact of, you know, the COVID and the recession concerns, maybe beyond just a typical commercial membership? Thanks.
spk08: Sure. John? Good morning, Justin. It's John Rex here. You know, as Dave pointed out, I think we are quite confident in terms of the underlying growth of the organization as we look towards 2021 and kind of in a normal year, I would think kind of things like even kind of where that consensus range sets at this point would be kind of in a normal zone that one could expect as an area that we would think about stepping out with. We are very respectful of the fact that it's anything but a normal year. And we've learned so much every month, I've got to tell you, during this period over the last six months. And in terms of how we operate, how our businesses perform, how we need to respond for the people we serve. And so we continue to be in a respectful mode in terms of learning more, understanding the situation better. and realizing there could be significant impacts in certain businesses as we think about performance. So we look at it in the world of excluding kind of this world we operate in today with kind of COVID-related impacts. A good zone, but you should expect that we think that there are potential headwinds within there, whether those are economic headwinds, whether those are factors in terms of what we need to do from a customer assistance perspective, and really the pacing of direct COVID care and treatment costs. So perhaps a long-winded way of getting at, we are in a mode still of really trying to be responsive to what we're seeing in the environment and evolve our thinking as that environment evolves. And Justin, I don't think I picked up your second question.
spk15: um if you could repeat that one it was just hard to hear real cowboys customize and save with liberty mutual can someone else get a turn yeah what i was asking is specifically around the this segment that could be impacted and in Most of all, I know COVID is a potential uncertainty, but I've heard in the market is a lot of companies are trying to price for that, adding a little bit to trend. Is that something that you felt like you did for last year and you're just still being conservative? Or do you feel like that's something that's tough to do in this environment? Thanks.
spk07: I mean, Justin, this is Dirk McMahon. How are you doing? What I would say is, you know, we're of course going to price to our best estimates of forward trends. That's going to include COVID. But, you know, you asked about the economic impact. So as we sat back and we looked at the third quarter, actually our membership was a little less impacted than we thought it was going to be because of things like the payroll protection program as well as some furloughs that large employers did. So, yes, there will be a little bit of a run-in problem, but less than what we expected. So from a membership standpoint, we're actually fairly optimistic about how we priced. We continue to look at how our block is priced for 1-1. And as we look at that, we're more than competitive and we monitor that every day. Thank you, Justin. Great questions. Next question, please. We're next to Frank Morgan with RBC Capital Markets.
spk11: Good morning. John mentioned an expectation for a decline in plan switching this year in the MA market. Just curious if you have any color on why you expect that to be the case. Thanks.
spk08: Just to follow up, I think one of the things I commented on was actually we are seeing less plan switching than normal. actually, and what we're seeing is strong adoption of people new to Medicare coming into Medicare Advantage.
spk06: Tim, do you want to add anything to Noel? Yeah, Frank, thanks to Noel. Good morning. Yeah, what John alluded to is that what we've seen in the marketplace is a decline in people that are switching from one MA carrier to the next. However, a lot of strength in what we call the chooser markets, which are folks that are newly eligible for Medicare or people that are choosing Medicare Advantage plans compared to other coverage types throughout the course of the year. So it's seen really good strong demand in those categories, but the plan switching activity was lighter, and in particular in March and April it's come back a little bit throughout the course of the year, and actually we've seen some better activity recently. So the dynamic in the marketplace as we head into annual enrollment period is one where we're trending back to an environment that's more normal compared to a selling season in the past.
spk19: Okay, thank you.
spk06: Thank you, Frank.
spk09: Next question, please. We're next to Ricky Goldwasser with Morgan Stanley. Please go ahead.
spk20: Yeah, hi. Good morning. Question on the Medicaid side of the enrollment impact from higher unemployment is coming in lower than you expect. When do you expect the impact to peak? How do you think about the balance of going to Medicaid versus exchanges? And then on the Medicaid side, has the pandemic changed how states think about transitioning the higher acuity populations to managed care? and what type of visibility do you have for Medicaid rates for next year at this point of time?
spk07: Pretty much covered the entire landscape, Ricky. Well done. We will try to be as responsive as possible on all of that. Tim Spokers, our chief executive for Communion State, Tim.
spk04: Yeah, hey, thanks for the question. And you are definitely hitting on a lot of the factors that we've been tracking. So first off, just in terms of enrollment, And Dirk mentioned this as did John in his opening comments. So far what we've seen just in terms of enrollment gains is really the result of the suspension of redeterminations as a result of the CARES Act. We really have not yet seen unemployment pull through, and I think that's reflective of some of the dynamics that we're seeing in the commercial market. And that's been supported, I think, by a lot of external studies as well. So we continue to watch this. I think we would expect that unemployment would pull through at some point. especially as the timeframe between loss of coverage increases. As for your second question, just around complex populations, yeah, we are actively monitoring states as they explore transitions to managed care. We believe there's a very strong value proposition, especially for complex populations, including those that receive long-term care services and HCBS services. We know based on our experience that managed care can deliver significant value, not just in terms of cost savings, but also in terms of helping individuals remain in their homes, helping people access social services and supports. And so we've been working with states and monitoring states' activity as they transition. I think we are seeing, you know, a very robust RFP pipeline, as Dave mentioned. And we're hopeful that many states include long-term care services and complex populations in those. And then finally, I think your last question was on funding and rates. And so just on that one, yes, this is something that we've also been working closely with our state customers on really to ensure that funding is sustainable both now and into 2021, especially considering all the dynamics in play. States are really taking a rational approach to funding. They're leveraging the appropriate risk management mechanisms, depending on their experience, so that could include, you know, risk corridors and MLR structures. They're also benefiting from some of the additional federal funding through the CARES Act. And then, of course, just as a reminder, Medicaid funding must be actuarially sound, which our states really do continue to use as a guiding principle. So this is certainly an area of focus for us. We have strong relationships with our customers, and we feel good about those conversations thus far. And then maybe just the last thing I'd say is sustainable funding and all of this work is really critical as it enables us to invest in programs that really do drive substantial social and health outcomes for our customers as well as for the people that we serve.
spk07: So, Ricky, I hope that was responsive, at least responsive enough. Thank you for the thorough question. Next question, please.
spk09: And next question is from Gary Taylor with J.P. Morgan. Please go ahead.
spk13: Hi, good morning. Two-part question, just in case I strike out on the first one. I was wondering if you could quantify the consumer and customer assistance, how that impacted the MLR this quarter. The second part of the question is just thinking about cost trend heading into 2021, you know, I think by the time this year is all said and done, you might end up being on your core commercial group, you know, cost trend down a couple hundred basis points at least. So when you're thinking about your guidance for 21, you know, are you thinking it could be a normal cost trend on top of that? Are you thinking it could, you know, deferrals would accelerate? It could be 200 basis points are more higher than normal. I'm just interested in your thought process on, you know, how you're going to, you know, comp, you know, what was an easier than expected all-in trend for 2020.
spk07: Well, I'll give you the strike on the first one because I don't think we're going to quantify customer and consumer assistance in the quarter. The one thing I will tell you is it's expensive. In particular, this is one of the primary quarters where the Medicare business was offering full copay waivers on both primary care and specialist visits. And the reason for that, Gary, is that we were deeply concerned and remain deeply concerned that Medicare consumers access their physicians just as quickly as possible, because they're obviously managing chronic disease. And we saw a very nice response to that program. So much so that we're extending elements of it into the fourth quarter. So that's where customer assistance will continue. In addition to that, we extended some other programs. You probably saw that our billion five initial estimate went to two billion. And in part, that was because of additional premium uh waivers and adjustments that that we we have made that will extend through the balance of this year um and and modestly into next as well uh so so that that gives you a color for the the kind of volume and the quantity of things that were going on during that during that time frame with respect to cost trends in 2021 yeah i would say you know gary this goes back to what dave said originally you know we do consider all those factors you described We consider what we expect COVID to do with respect to testing, with respect to treatment, all things that are associated with abatement as well. We make an estimate of that. We try to make a forecast of when the vaccines would come available. So all those things are considered as we price our business for next year. I'm not going to get into the exact number of basis points associated with each one of those. That's competitive. But I mentioned earlier, we do monitor what's going on in the market, what we see. with ongoing trends in all three of those buckets as well as all the underlying costs. And we make our best estimate as to where we should land to be competitive from a membership growth standpoint as well as an earning standpoint. That's what we do. And we have actuaries and we have our management teams that are pretty experienced with that. So thank you for the question, Gary. Next question, please.
spk09: We'll go next to Scott Fidel with Stevens. Please go ahead.
spk10: Hi, thanks. Good morning. Just wanted to follow up on Medicare Advantage for 2021 and the comments that David made around industry-leading growth expectations. And I guess really just a two-part question to this, just one. So we do have CMS projecting the at least 10% enrollment growth for individual MA for 2021. So just interested in terms of your commentary on industry-leading growth, how you – uh take that into context and whether that would support double-digit uh enrollment growth in individual ma uh for uh 2021 and then just secondly um sounded like the comments around group group ma it sounded pretty bullish in terms of sales just um interested if you can maybe quantify for us the expected uh uh the group group ma lives that that so far you think you've added for 2021. thanks just just to clarify scott from from at least
spk07: From my standpoint, what I really look at is the number of people served and what our performance will be relative to the market overall. And as has been pretty consistent over time, UnitedHealthcare, Medicare and Retirement has outperformed on that metric in particular. What I like about this year in particular is what, you know, not only the group MA component really coming off of what would be a disappointing year in 2020, meaning the 2021 actual policy year, but also the kind of setup for individual MA and continuation with our newly eligible members and their growth. So that's the essence of the backdrop of the comment that I made. Tim, do you want to add anything further?
spk06: Yeah, yeah, thanks, Scott. So selling obviously starts tomorrow for individual Medicare Advantage. We've been marketing our products since the beginning of October, receiving really positive feedback from the broker community about how we're positioned. And once again, as you know, our top priority is providing stability and benefits for the members that we serve. And as we go to market, we are happy to have succeeded in providing that for our members. And in fact, about 75% of our members will experience improving benefits in 2021 compared to 2020. And we also made some additional investments and capabilities to support seniors. So given that backdrop, we do feel really good about our positioning to being shared. an individual MA, group MA, as well as the dual special needs plans market. You know, we're not going to comment specifically on any point estimates for industry growth, but we really like our positioning inside of the growth, whatever that might be. And, you know, today's comments, we're really excited about our group MA growth in 2021.
spk07: Great. Thank you, Scott. Next question, please.
spk09: And next we'll go to Robert Jones with Goldman Sachs. Please go ahead.
spk11: Great. Thanks for the question. Yeah, I guess maybe just wanted to get your latest thinking on participating in direct contracting next year. Obviously through OptumCare, was wondering if this would contribute at all to your projections around global cap-wise growth, or would that be incremental? And then maybe just relatedly, you know, how are you thinking about direct contracting relative to the opportunity, obviously, around MA on the UHC side? Thanks.
spk07: Want to start with UHC?
spk08: Sure. Brian Thompson here. As it relates to Medicare Advantage, as you've known from us for a long time, we've had the enterprise perspective of modernizing fee-for-service.
spk07: We're certainly encouraged by any activities like this. We participate in things like bundling payment programs, et cetera, and I see direct contracting as a positive to try to modernize the overall fee-for-service system in total and why it obviously is looking at direct contracting to go into often care.
spk04: Yeah, thanks PT and Robert. Thanks for the question. We are very encouraged by every effort to move from fee for service to value based contracting.
spk07: So view this as a positive trend. The direct contracting proposals are primarily geared towards smaller groups that are in fee for service and we have been in risk based arrangements for over 10 years. And so while we will embrace this where it's appropriate. We have relationships with over 80 payers and we'll expect to see continued double digit growth of our MA and dual risk lives that we care for. And I don't anticipate that the direct contracting will be a major factor for us. But again, I don't mean to say that in any kind of a negative way. It's a good program, but we will embrace all vehicles to grow. Thank you. Thanks for the question, Robert. Next question, please.
spk09: We'll go next to Sarah James with Piper. Please go ahead. Your line is open.
spk21: Thank you. I was hoping you could give us some context around corporate tax reform. Looking back to 2018, you sized the benefit around $2 billion. I'm wondering where that sits now and if there's a difference between product lines and how we should think about which line benefited on the margin side versus was passed through for pricing changes or other items.
spk01: After saving with customized car insurance from Liberty Mutual, I customize everything, like Marco's backpack.
spk08: Sarah, good morning. John Rex here. So I think if we go back to that former period that you were discussing in corporate tax reform, I think There are a number of things that we commented on during that period and in terms of impacts. And if you recall, during that period we also commented about investments that we were making as a result to build for future growth and how we were investing in the businesses for the longer term. Certainly that was an element there. Clearly, since that period, a number of years ago now, the company is much, much larger. So you would expect kind of that impact, you know, much smaller from an effective tax rate impact than we would have had back in that time. You know, among the other elements that you were talking to, corporate tax reform and impacts, you know, I think it's – tough really to kind of get out ahead of anything in terms of potential impacts and even how those impact on specific businesses just because there isn't some. We just don't really don't want to get ahead of any kind of policy that might be out there. So probably would just leave it at that. Thank you.
spk07: Thank you, sir. Next question, please.
spk05: Next is David Wendley with Jefferies. Please go ahead. Hi, good morning. Thanks for taking my question. I'm interested in, I appreciate the comments, several kind of percentage of baseline utilization numbers offered in the prepared remarks. I'm curious how that has progressed, perhaps through the quarter. For example, by the end of the quarter, were some of those at or above 100%? Are you expecting that to get to above baseline in the fourth quarter? and based on your assessments of kind of pent-up underutilization and system capacity, how long might you expect that to last? And then just to tag on, the DCP for the first couple quarters of the year had been pretty consistent year over year, but at the third quarter is down, you know, a couple days, two to three days. I'm wondering how that folds into that view of where utilization is going. Thank you.
spk08: Good morning, David. John Rex, let me answer, try to get at those. So first of all, let me give you a little more color in terms of what we saw in utilization over the course of the quarter and how it fits to what we were seeing last quarter and such. So I spoke to kind of baseline exceeding 95% across our businesses as we look at utilization at this point here. Maybe get a little color kind of with context within that and different categories and how those would trend. Point out, if I look at physician services, that would be below that baseline. I'd put outpatient surgery, that kind of the right of kind of in that zone of baseline, and I'd put inpatient above that baseline zone. As we look down at kind of various populations and such, maybe a little color commentary in terms of how that trends. So commercial, certainly kind of higher in terms of where we're seeing utilization and where we're seeing against baseline. and government program services lower. And within that, I would say kind of within the government programs, I'd say the community state business being the lower element of those and the way it's trending. One important element here, so what you referred to from the commentary we had for our expectations for the fourth quarter, and among those were that care that has been deferred, that we are able to help facilitate that care and cures. And, you know, that's kind of where we're making investments and what we want to see happen here. The other element that we anticipate as we look towards the end of the year is we have been anticipating rising acuity because of deferred and mistreatment. We see a higher acuity population. I tell you, we really haven't seen that yet. Where we see rising acuity on the overall book, it's because of the COVID-19 cases that come in at a higher acuity level. And so you see a higher acuity on that component. But if you take that component out, we don't really see it across the full scope of the book of our business at this point. As to your comment over the course of the quarter, what we saw, it was an interesting quarter from that perspective because you saw different incidence rates in different parts of the country over the course of the quarter. So we really monitored that quite closely. And you would see, as a particular part of the country, as you saw infection rates begin to rise, you would see deferral come into that mix. Given our platform across the entire country, we have a viewpoint into that. But you'd see deferral, and then you'd see it come back in. I think the last place I would just point out is, Within kind of that baseline that we're talking about, so I said exceeding 95%, I put kind of in the zone of five points or so, or probably COVID-19 driven in terms of within that mix, and that's inclusive in the baseline we're talking about. And then DCP? And DCP, thank you for reminding me. So DCP, the decline year over year, so that is due to the really could be acceleration in provider payments that we took on earlier in the year. So as we really were trying to get liquidity injected into the healthcare system, we accelerated our payment cycles very, very significantly, and that continues. The reason you wouldn't have seen that in the second quarter is because of the very significant deferral of medical care in the second quarter. just kind of getting into the math of it, right, you get a denominator here where medical cost per day was declining very, very significantly in the second quarter. So that more than offset the impact of those payments. As we saw care being restored much closer to normal levels this quarter, then that comes up, and so now you're seeing the impact of that accelerated payment cycle show up in our DCPs, but that was the impact of
spk07: Just to remind you to give your sense of that, as we indicated in the prepared remarks, as well as around the $2 billion advance to the market or acceleration in payment.
spk09: Thank you, David. Next question, please. And next is Charles Rhee with Talon. Please go ahead.
spk03: Yes, hey, thanks for getting the question. Maybe if I could follow up on that about utilization and tie it back to sort of your comments around the outlook for 21. If it sounds like inpatient volume is a little bit above normal, other areas are a little bit below, and overall let's say we're kind of getting back to a normal baseline utilization, you know, given that kind of pace that we're on this year and then we think about next year, you know, what is it in your thinking that, makes you think that we're going to see a really big uptick in utilization because it sounds like when we go back to the earlier part of the the q a when you were in your comments dave and john at the end was you know next year you're thinking about a more conservative starting point um to think about the 21 outlook and i understand that you know we'd want to back up some of the the one-time items uh that were positive for this year but maybe you know maybe he'll understand a little bit you know, what is your underlying assumptions for utilization? Because it seems to me and, you know, the pace that we're going at, you know, it doesn't strike me that we're going to really have really over-utilization per se next year. Maybe help us understand what maybe you're seeing here as we're now into part of the fourth quarter that kind of gives you that sense.
spk07: Yeah. So my comments are really grounded in the unprecedented uncertainty as we look forward and the deep respect for the pandemic and and its impact on the economic climate. And that's why, as you think about being at this distance, stepping out, recognizing that as kind of a future expectation, you would normally widen your range, and you would probably take a more conservative posture. And that's essentially what we were trying to communicate.
spk08: John, do you have anything further to add? No, sort of the one thing, your comment, and I think you said kind of we've seen inpatient kind of above normal. I wouldn't say that's where we are. I said on that exceeding 95% baseline, I was orienting those categories around how they orient around that exceeding 95%. That inpatient rides a little above that, physician below that, and outpatient surgery is kind of right in that zone. So that's more the commentary that I was providing there, not that inpatient is running above baseline yet. But, you know, we certainly categories are progressing to that. And I think it goes, you know, in terms of your broader commentary into what to expect for utilization. So we want to make sure people get the care they need. You know, that's why we're here ultimately. And so we're going to do everything in our power to make sure that that care occurs. So you heard some of the commentary offered earlier in the year even in terms of what was going on different categories in terms of cancer diagnoses, different areas that were off significantly. You know, that's not kind of good for people. That's not good for the system. We want to make sure that that care is getting delivered. And there are areas of care that, you know, we're going to be very proactive in making sure that people are able to access that. You know, in our we have both direct access in the often care businesses. United Healthcare is being very proactive in its outreach to vulnerable populations and making sure that they're getting the treatments that they need. So our ambition is to make sure that that care is delivered. There's a lot of necessary care that's not happening also. But I'd come back to Dave's commentary as we look out to 2021 and some of the earlier themes of it. We've been learning stuff all along the way over this past many months, and we continue to evolve that thinking. We continue to feel like we get better perspectives and why deeply respectful in terms of, you know, we don't really know how this moves over the next several months also. So I think that's what you hear in terms of our commentary, in terms of how we think about stepping out and why. We want to be respectful of an environment, frankly, that – no one has navigated before. And I think that's just what you would expect us to, the way you'd expect us to approach it. Thank you.
spk07: And we'll take this next 30, 45 days or so to accumulate more facts, understand even better, and then lay all this out for you in more detail to the best of our ability when we get together on December 1st. We have time for one more question with a quick question and answer, and then I'll close.
spk09: And we'll take that question from Lance Wilkes with Bernstein. Please go ahead.
spk02: Yeah, I just wanted to ask for employer enrollment, how's that progressing in October, and what's your outlook for 4Q and beyond? And if you can give any clarification in OptumRx on kind of the real sharp increase in revenue per script and some of the compression and margin, that would be helpful too. Thanks.
spk07: Lance, I don't think we'll be able to give you insights into October and the quarter specifically, but what we can give you insights into is, you know, what the progress is we're making across the board in the commercial market going forward. I'll give you some sense of that without quantifying it. Dirk? Yeah, I would say that, you know, as you think about the fourth quarter, the sense should be there's a good amount of stickiness with respect to the end of this year in terms of persistency that we're seeing with our groups. And further, I think as we look at next year, I think we talked about in the script, We'll have a lot of good products coming off the assembly line that we're very enthused about. All savers are level-funded products. Buying a good product, which basically is a scenario where you have a base level of courage and you buy up for care as needed in certain categories. Then we have what I would say a bunch of provider-centric products where we're looking at really efficient, high-quality networks and having low-income consumer out-of-pockets associated with those. So what I would say is We're optimistic about our product portfolio for next year. As you look at the fourth quarter specifically, we've had good stickiness in terms of our persistency. Yeah, I think the commercial business is doing a nice job. Obviously, we're very dissatisfied with the start of this year, but I think they've come on stronger as the years progress with a wider array of product choices and offerings, but also getting the cost structures in line and being able to reflect that in more competitive price positions in the market overall. Again, appropriately indexed forward view of cost plus margin, which reflects the variability of the future marketplace. John, do you want to touch on the script? Sure. Lance, John Prince. Talking about our revenue growth, we've had really strong growth in our specialty business as well as Infusion, our community pharmacies, which is Genoa. That has been a big driver, as well as our external client wins we had on the beginning of the year. If you look at our services businesses, which is those services, as I mentioned, they're growing almost 30% inside that, so really strong growth in that. In terms of our margin and why it's declined year over year, it's really two factors. One, on the earnings side is the impact of COVID-19, as you know, with the pandemic. We've had less first bills in Q2 that continued in Q3, as well as we've seen in Q3 less utilization per member, as well as some loss in unemployment. So that's impacted our earnings. And then on the denominator side, the retail copayment, which was added to revenue in 2020, was added to the denominator, which actually impacted the margin in Q3. Overall, We're quite pleased with our margin performance. As you see, between Q2 and Q3, our earnings grew sequentially by 16%, as well as improving our margins. So overall, we're seeing we're executing very well. Thanks, John. Thank you, Lance. And thank all of you for your interest and the very thoughtful and insightful questions that you offered today. As you know, this is an unprecedented time in our company's history. And as you've come to expect, we will continue to respond and lead with full strength, compassion, and fortitude, restlessness for serving the unique needs of every one of the 140 million people we serve around the world. Despite the challenging times, the 325,000 people of the UnitedHealth Group are deeply committed, and they're energized about our work to advance the next generation health system in a socially conscious way. It's a health system that will be universal, affordable, simple, and effective. and we look forward to engaging you in several weeks at our upcoming annual investor conference on Tuesday, December 1. We see the virtual format as an opportunity to provide you an even deeper view of our company, its strategic plans, its people, and our future. Thank you very much.
spk09: And this will conclude today's program. Thanks for your participation. You may now disconnect. Have a great day.
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