The parent of the nation’s largest health insurer posted net income of $6.64 billion for the second quarter.
Photo: Ringo Chiu/Zuma PressUnitedHealth Group Inc. UNH -1.81% saw profits rise sharply because of savings from surgeries, hospital stays and doctor visits canceled amid the coronavirus pandemic, but the company said that health care returned to near-normal levels in recent weeks.
The second-quarter results from UnitedHealth, parent of the largest U.S. health insurer, UnitedHealthcare, offer one of the broadest pictures so far of the pandemic’s financial impact on the health sector. The company’s Optum arm also owns a sprawling network of surgery centers, doctor practices and urgent-care clinics.
UnitedHealth posted net income of $6.64 billion, or $6.91 a share, compared with $3.29 billion, or $3.42 a share, in the same period last year. Adjusted earnings were $7.12 a share. Analysts polled by FactSet, who had expected a boost, still hadn’t predicted a financial windfall as big as the one UnitedHealth saw: They were looking for earnings of $5.02 a share, or $5.28 a share on an adjusted basis.
Across the country, elective surgeries paused for months this spring as hospitals and other health-care providers braced for surges of coronavirus patients. Many Americans also steered clear of clinics and emergency rooms, fearing infection.
The insurers’ payouts for coronavirus care so far fall well short of the savings they have accrued from all of the forgone procedures and other routine care.
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“When you shut down the nation’s whole medical infrastructure, it’s a massive decline in what UnitedHealthcare typically pays for,” said Gary Taylor, an analyst with JPMorgan Chase & Co. “It’s completely unprecedented, the magnitude of it.”
UnitedHealth said that the use of health-care services began returning to near-normal levels in June, a shift that continued into July.
The company said it expected higher health-care costs in the second half of the year, as people seek deferred care. UnitedHealth also said testing and treatment expenses tied to Covid-19 would continue into 2021.
“At this distance, the evolution of the pandemic, when, and to what extent the economy will improve, are very much open questions,” said UnitedHealth Chief Executive David Wichmann in a conference call with analysts and investors.
The company held steady its full-year earnings guidance of $15.45 a share to $15.75 a share, or $16.25 a share to $16.55 a share on an adjusted basis.
UnitedHealthcare’s enrollment in commercial plans dropped, a sign of how the economic downturn is affecting employers and workers, who are experiencing furloughs and layoffs. The insurer saw growing membership in its Medicaid and Medicare products.
The company posted revenue of $62.14 billion, up 2.5% from the comparable quarter last year. Analysts were expecting $63.48 billion.
The clearest measure of how the slump in routine care lifted UnitedHealth’s results was the insurance unit’s medical-loss ratio, which represents the share of premiums paid out in claims. UnitedHealthcare’s MLR was 70.2%, compared with 83.1% a year ago.
JPMorgan’s Mr. Taylor said it was the lowest quarterly figure in his two decades of data for the company. A UnitedHealth spokesman said it was “historically low.”
UnitedHealth said that at its lowest point in April, inpatient care was running at around 75% of typical levels, while outpatient and doctor services were down to around 60% of normal. Both types of health care rose to near-normal levels in June, the company said, with hospital inpatient care at nearly 95% of the usual level.
The company said the trend has continued in recent days, despite rapidly rising coronavirus cases in many parts of the country that might derail hospitals’ efforts to restore normal lines of business, forcing them back into crisis mode.
“We don’t expect to see a broad-based shutdown” of the health-care system in the second half of the year, said Dirk McMahon, chief executive of UnitedHealthcare. The company also said that patients could have higher costs later in the year because they had deferred needed treatments, or suffered from worsened health because of delayed diagnoses.
Insurers have already come under pressure from regulators to disgorge some of the savings to their customers. Companies including UnitedHealth have pre-emptively offered premium credits and other discounts, including waiving many out-of-pocket charges to access care. UnitedHealth said it had paid out $1.5 billion in such discounts.
“No one wants to see a health plan profit off of Covid,” said Dan Mendelson, an operating partner at private-equity firm Welsh, Carson, Anderson & Stowe. “The health plans are very aware of that.”
UnitedHealth also said it expected to disburse another $1 billion in rebates required by the Affordable Care Act, and the cost of the projected payment was already reflected in its earnings. The law requires insurers to spend a certain share of premiums—80% for individual and small-business plans and 85% for large employers—on health care.
If the spending ratio falls short, insurers owe refunds to customers, but the payments tied to 2020 plans won’t start flowing until the fall of 2021.
Write to Anna Wilde Mathews at anna.mathews@wsj.com and Dave Sebastian at dave.sebastian@wsj.com
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