UnitedHealth says seasonal pressures on MA utilization eased in Q1

While all eyes were on UnitedHealth Group on Tuesday for an update on the cyberattack that's continuing to disrupt the industry, the healthcare giant also offered an update on multiple critical trends in Medicare Advantage (MA).

UHG is a bellwether for the insurance industry and was the first to sound the alarm last year about a spike in utilization among seniors that dragged the medical loss ratios of multiple companies. In its fourth-quarter call, UnitedHealth executives said that a spike in COVID-19 admissions and respiratory syncytial virus vaccinations combined with a return to elective care to drive up utilization.

The seasonal activity has largely come to an end with the winter, said President and Chief Financial Officer John Rex on the company's earnings call. 

"The winter seasonal activity we discussed with you in January, particularly related to strong vaccine uptake, higher respiratory illness incidents and related physician office visits has subsided," he said. "Overall inpatient care activity also remains within our expectations."

The medical loss ratio in the first quarter was 84.3%, Rex said, and that accounted for roughly $340 million that was related to a temporary pause of certain care management activities as part of the response to the cyberattack. The MLR was also inflated by the company establishing a $800 claims reserve as it continues to mitigate disruption caused by the hack.

For comparison, UnitedHealth's medical loss ratio in the first quarter 2023 was 82.2%.

CEO Andrew Witty said that the "overall care patterns are consistent with what we anticipated last year heading into 2024" and are in line with the guidance issued in November. He said with the weather-related effects receding, the company isn't seeing anything additional that it would call out as unexpected around utilization.

Insurers like UnitedHealthcare with a significant business in the MA space all reported similar trends in the fourth quarter of 2023 and were bracing for continued effects going into the early parts of this year.

Beyond utilization, UHG leadership also touched on the ongoing response to changes around risk adjustment data validation and the recently finalized 2025 rate notice for MA, which industry groups have slammed as a cut.

Witty said UnitedHealth is in the midst of a three-year response to the RADV updates, which aligns with the rollout. The Centers for Medicare & Medicaid Services (CMS) finalized the anticipated updates a year ago and phased in the changes over three years.

He said  this approach puts the company in a strong competitive position.

"Our strategy continues to focus on providing as much stability as possible in the reduced funding environment," Witty said. "Improving outcomes and experiences for the consumers we're privileged to serve, and delivering the performance you expect from us."

While executives didn't get into specifics about what their expectations are going into 2025, Tim Noel, CEO of UnitedHealthcare Medicare and Retirement, said on the call that the final rate notices do align with some of the recommendations the company has pushed for with CMS, while others are in the ballpark but not entirely consistent with its suggestions.

He said that UnitedHealthcare experts have been in regular contact with CMS on the topic, as "we continue to believe that there's opportunities to improve the distribution environment in Medicare Advantage."

"I would also say right now, it's a little bit early to comment on how this might rebalance some of the channel mix, as [there are] still some questions on how some of the key elements of that will be rolled out," Noel said. "So we're still waiting for a little bit more detail before we can get more specific on how it impacts go-to-market in '25."