UnitedHealth Group Inc

NYSE:UNH

Earnings Call Transcript 2018-Q2

[Operator]

Good morning. I’ll be your conference operator today. Welcome to the UnitedHealth Group’s Second Quarter 2018 Earnings Conference Call. [Operator Instructions] 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 uncertainties 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 Reports & SEC Filings section of the company’s investors page at www.unitedhealthgroup.com. Information presented on this call is contained in the earnings release we issued this morning and in our Form 8-K dated July 17, 2018, which may be accessed from the Investors page of the company’s website.

I would now like to turn the conference over to the Chief Executive Officer of UnitedHealth Group, Mr. David Wichmann. Please go ahead.

[David Wichmann, Chief Executive Officer]

Good morning everyone, and thanks for joining us for our second quarter report. We are encouraged by how our businesses are advancing in service to customers, consumers, physicians and across the health care system at large. Encouraged, but far from satisfied. Continuous innovation and improvement in the health care experience are critical to fulfilling our mission, helping people live healthier lives and helping make the health system work better for everyone.

Consistency in high-quality care, consumer experience and value build trust and loyalty. These drive retention and growth and position us to deliver strong and reliable financial results in 2019, 2020, and beyond. First half 2018 performance illustrates strong execution on this path. Compared to last year’s first half, revenues of $111.3 billion, increased 12.7% or $12.5 billion.

Adjusted cash flows from operations grew to $7.2 billion and adjusted net earnings grew 28.2% to $6.19 per share. For the full-year, our outlook for adjusted net earnings per share is increasing to a new range of $12.50 to $12.75 per share. And we expect cash flows from operations for 2018 to approach $15.5 billion, which is the upper end of our previous guidance.

Importantly, our enterprise-wide Net Promoter Score is tracking to advance meaningfully again in 2018, after increasing 6 points in 2017. Our NPS is particularly strong or strongly improving across our government program customers and consumers, within our care delivery businesses, with network physicians and their practice managers, and with customers and consumers at UnitedHealthcare Global and the pharmacy business at OptumRx.

NPS across the employer health benefits base remains solid, with upside opportunities to distinguish our performance among commercial market consumers. We believe emerging innovations around a next generation of digitally enabled, highly personalized services combined with more evolved consumer-centric benefit offerings will further advance our NPS performance.

Quality continues to be strong and rising. Approximately 80% of our Medicare Advantage seniors will be served by 4-star rated plans in 2019, and we are looking to improve on that strong base in 2020. For commercial benefits, we expect more than 40 local market health plans will be rated in the top HEDIS categories in 2018, up from just 10 two years ago. And we continue to help create a better future for health care through Venture investments; building new businesses organically; ongoing investments in innovation throughout our enterprise; and, open source innovation through partnerships and strategic acquisitions of businesses and capabilities.

We look forward to sharing some of these and other innovations and developments with you at our annual investor conference. As you know, we apply core competencies in clinical expertise, technology and data analytics to serve people in differentiated ways across our operating platforms, focusing on our five, long-term growth pillars. Transforming pharmacy care services is just one of those pillars. Applying our core competencies in the pharmacy arena yields a better service experience, transparency, simplicity, lower costs, higher value and growth, and we do so engaging proactively with customers, manufacturers, distributors, and retailers across the industry.

UnitedHealth Group now has more than five years’ experience synchronizing medical care and pharmacy care for patients. Over those five years, we have continually applied learnings to refine our approach, while hardening, scaling and expanding our services. Results in market share and NPS gains suggest we are the clear market leader in capability, experience and value. We deliver integrated pharmacy care services to employers and health plans on both a carve-in and a carve-out basis.

Health plans and employers continue to award OptumRx new business, while existing customers are retained at a high 90s percentage rate, year-after-year. Here’s how this integration of pharmacy and medical care actually works. Optum’s analytics engine processes administrative, demographic, clinical, lab, pharmacy and behavioral data to produce specific next best action information at the individual consumer level and identify the highest value actions an individual is most likely to take. That likelihood is a critical element because an action not taken produces no value.

We then deliver the insight to patients, consumers, and physicians on a multi-channel basis. Perhaps they need help adhering to a medication regimen, or digital coaching to better manage a chronic condition, or they would benefit from our digital weight loss and diabetes prevention program. This year our customer advocates will help people, in real time, schedule hundreds of thousands of doctors’ appointments to close specific gaps in care. Together, these services are helping client’s advance quality, lower costs and improve consumer satisfaction. This integrated approach improves pharmacy adherence by 12%, while helping reduce hospital admissions and ER use by 6%.

Our digital PreCheck MyScript service offers clarity, transparency and simplicity to the prescribing physician through their electronic medical record, while helping patients at the point of care. Already today, PreCheck MyScript is integrated into the practice flow of physicians who treat as many as 5 million OptumRx consumers over the next year, and we will grow that figure aggressively over the course of the next 18 months. These people will have a simpler experience at the pharmacy counter, as a direct result of the real-time pre-authorization capacities and the formulary cost and coverage information delivered to their physician by PreCheck MyScript.

OptumRx continues to emphasize timely, convenient prescription delivery for consumers. Our specialty pharmacies have long used local hubs to provide same day and next day delivery, with clinical support and counseling provided by pharmacists via modern telemedicine. We provide infusion services, delivering specialty pharmaceuticals to patients in their homes over 350,000 times annually, and we have begun to apply these services more broadly through our OptumCare sites. Patients using maintenance medicines receive refills in advance of their refill dates through our home delivery services, providing value and convenience for these prescription needs.

Finally, we are improving real consumer value, as a leader in offering transparent, point of sale discounts to consumers at the pharmacy counter. These meaningful discounts will be embedded in the basic benefit design for more than 7 million UnitedHealthcare insured consumers. We are the only party incented to reduce both the net cost of drugs for people and the total medical cost for customers, giving us a unique value role in the pharmacy supply chain.

All of these capabilities appropriately manage pharmacy and medical cost trends, ensure the highest levels of patient safety, simplify the consumer’s experience and improve value. Innovation, quality, service and performance across all five growth pillars will be critical to helping us fulfill our mission and doing our part to help the markets we serve advance care access while reining in growth in health care spending.

Now, let me now turn it to Andrew Witty for an update on our Optum business. Andrew, welcome to UnitedHealth Group.

[Andrew Witty, Chief Executive Officer, Optum]

Thank you, Dave. I’ll start today by expressing my admiration and appreciation toward all those whose work has created the extraordinary Optum platform, which is frankly unlike any other health care business in the world. As a member of the UnitedHealth Group Board of Directors, I had the opportunity to get to know the company and its people.

And now, as Optum’s CEO, I am further impressed with the capabilities and talent we have at every level of this company and the breadth of opportunity for Optum to serve and grow in pursuit of its mission.

Optum is vibrant and performing well. This young company will continue the nimble, market-responsive approach it has embraced since its inception, enabling Optum to serve more people, in more ways, and producing consistent, strong growth in revenues and earnings.

In the second quarter 2018, OptumHealth increased the number of people it serves by 7% to 92 million, and revenue per person grew 12% over last year, as OptumCare grows and diversifies its businesses. OptumInsight’s backlog grew nearly 15% year-over-year, on the strength of its technology, data analytics, business process and advisory services. And OptumRx again filled over 3% more adjusted prescriptions, as it continued to expand its market share.

Overall, Optum second quarter revenues grew by more than $2 billion over last year, growth of about 9% to nearly $25 billion. Optum’s earnings from operations rose 21.5%, driven by strong revenue growth and 80 basis points of margin expansion, due to both operating advances and solid, fundamental expense disciplines. Importantly, all three Optum segments expanded margins and grew operating earnings strongly.

Now, looking ahead, the differentiated value we deliver to customers positions us to sustain growth into 2019 and beyond. Digital health is a UnitedHealth Group growth pillar, like pharmacy care services. Rally, part of Optum, has emerged as a market-leading comprehensive consumer digital health platform, fully implemented and operating at scale, with multi-payer capabilities. Rally is our digital front door for the consumer.

Rally helps people easily select the best health benefits plans for their families, assess their health, pursue wellness and, when care is needed, engage effectively with the health care system. Rally has now surpassed $1 billion in cumulative incentives paid to consumers, standing apart in an early stage digital health marketplace. Consumers earned these incentives for taking real actions to improve their health, like receiving biometric screenings, working to stop smoking, or selecting a primary care physician, to just name three of many.

By moving to digital coaching from legacy telephonic models, Rally triples the number of individuals engaging in our programs, while creating much higher consumer engagement intensity and loyalty. As a result, our customers are avoiding millions of dollars in downstream medical costs. Already one-third of our wellness coaching customers have moved to this new approach and more than 90% of their coaching engagements are digital, compared to an entirely analog experience only one year ago.

OptumInsight continues to grow steadily, working actively with payer customers, large and small, supporting their efforts to maintain and improve clinical quality, administrative accuracy and payment integrity. Our artificial intelligence capabilities in areas like natural language processing for clinical information are embedded in our product sets and have proven valuable to both payers and care providers. Today, care providers who deliver care to nearly one-third of all Americans use Optum Performance Analytics, deepening and enriching the clinical data sets we use to improve performance of health care systems and the

health of people.

At OptumCare, we are creating the structure to advance more modern and locally effective clinical and administrative models, for the benefit of physicians, patients and customers. OptumCare actively advances the practice of evidence-based medicine and meaningfully improves consistency in care quality, while sustaining NPS scores in the range of 80 and offering more convenient sites of service for applicable procedures and examinations at more than 500 community locations nationally.

Savings are more than 50% compared to less effective sites of care. This business is early in its growth curve, and, like digital health, we see it is another important long-term growth pillar for the enterprise.

Finally, as you heard Dave say, the value being delivered in pharmacy care services is translating into higher NPS and continued client retention rates in the high 90s at OptumRx, and new wins, including three new health plans for 2019. We are already hard at work with prospects for 2020, even as we further strengthen capabilities for 2019.

In sum, our businesses are growing and performing well today and preparing for next year, and we believe our investments in people, technologies and processes position us to grow for years to come. I am energized by the potential Optum has to make a meaningful difference in health care.

And now, I’d like to turn the call over to Steve Nelson, UnitedHealthcare’s CEO.

[Steve Nelson, Chief Executive Officer, UnitedHealthcare]

Thank you, Andrew, and welcome. UnitedHealthcare grew to serve 2.2 million more people over the past 12 months. All-in, our revenues advanced more than $5 billion over last year to nearly $46 billion in the quarter, growing at a 12% pace, with Medicare & Retirement revenues growing nearly 13% and Community & State by more than 17%. Our commercial business continues to serve nearly 27 million people, with steady growth of 50,000 people in risk-based offerings this quarter, while the public and senior sector grew to serve 60,000 more people.

We also experienced minor attrition in our fee-based products in the second quarter, similar to the second quarter of last year. The pricing we are receiving for risk-based products remains consistent with our expectations, and commercial medical cost trends remain steady, also in-line with expectations. And, we’re performing well on managing administrative costs across UnitedHealthcare. In total, our second quarter earnings from operations of $2.4 billion

grew 7% over second quarter last year.

Looking forward, we are progressing well on two more enterprise growth pillars; consumer-centric benefits, and global. As we improve our total cost of care position and simplify the consumer experience. In consumer-centric benefits, we continue to align our approaches with value-based care delivery, supported by modern digital resources and data-empowered human and digital advocates, who help people navigate the system and achieve their health and care objectives. This modern, integrated approach increasingly enables greater personalization, better information flow and improved consumer experience and value, as measured by NPS.

For example, in our Medicare products, value-based care is driving 5% increases in key screenings, a 13% lower rate of emergency room use and a 3% increase in the number of seniors with regular doctor visits. All of which ultimately impact cost, satisfaction, consumer retention and growth for our business. It’s all about helping people at the moment they need it, and then making it as simple as possible for them to make the best decisions to improve the effectiveness and quality of their care, affordability and overall satisfaction. These themes hold true, whether the person making that decision is a patient with a medical issue, a healthy consumer focused on prevention, a physician treating a patient, or a business executive understanding value drivers in their health benefit offerings.

Looking ahead, we expect to continue to see strong growth in serving those with higher acuity needs, like seniors, dual special needs, long-term support services and the chronically ill. UnitedHealthcare Global just completed the first full-quarter with Banmedica, which is growing and performing well, serving the people of Chile, Colombia, and Peru. Strong year-over-year improvements in business performance were made in Brazil, as focused efforts over the past half-decade have strengthened Brazilian clinical integration and business alignment.

These efforts have been instrumental in improving earnings in that region and will continue to gain momentum going forward. Amil’s recent recognition as the most innovative health insurance company in Brazil was informed by advances in technology, consumer experience and product design, and investments in primary care delivery and new models for paying for care. Our young South American business is well positioned, with strong assets, a stabilizing business environment and a long runway for growth.

Now I’ll turn the call over to John Rex, UnitedHealth Group’s Chief Financial Officer.

[John Rex, Chief Financial Officer]

Thank you, Steve. The well-balanced quarter we reported this morning includes consolidated revenues growing 12% over last year to more than $56 billion. Our earnings from operations exceeded $4.2 billion, growing nearly 13%, on steady operating margins. Adjusted earnings increased 28% to $3.14 per share, and our cash flow from operations grew to $4 billion.

Turning to details, we continue to expect our 2018 medical care ratio to run in the range of 81.5% plus or minus 50 basis points, with commercial trend well within our range of expectations of 6%, plus or minus 50 basis points. In the quarter, our consolidated care ratio of 81.9% reflects the impact of the health insurance tax, offset by changes in business mix and reserve development, both compared to last year. This quarter’s favorable development was principally due to favorable cost true-ups from the first quarter 2018 business.

Our second quarter operating cost ratio of 15% increased only 40 basis points over last year, despite including about 1 percentage point cost increase from the return of the health insurance tax and higher investments in innovation and business development. We offset that pressure with strong revenue growth in lower operating cost ratio businesses like Medicare and Medicaid and operating expense discipline across the board.

Turning to our balance sheet, we continue to maintain distinctive strength and flexibility. Return on equity for the second quarter exceeded 24%, and our debt to total capital ratio was 40.8% at June 30. In June, the board of directors raised our shareholder dividend by 20% to an annual rate of $3.60 per share, and we continue to deploy capital to further diversify our company through focused merger and acquisition activities and for our longstanding share repurchase program.

We are optimistic as we look ahead to the second half of 2018 and into 2019, and strive for continued performance improvement, while taking a realistic and prudent view of the future. As Dave mentioned, we now expect 2018 cash flows from operations to approach $15.5 billion, and adjusted earnings in the range of $12.50 to $12.75 per share, growth of 24% to nearly 27%.

[David Wichmann, Chief Executive Officer]

Thank you, John. We think about the numbers shared with you today as the result of serving millions of people, one person at a time, one health system at a time. We continue to advance value, simplicity, affordability and quality. Doing so in differentiated ways increases our value and sustains our growth. Growth provides even more opportunities to fulfill our mission and deliver long-term performance for the people we serve and our shareholders.

As we pass the midpoint of this year, we begin to shift focus to the year ahead when we expect our enterprise to continue to innovate, grow and perform strongly for society and for our investors. We expect to grow revenues, earnings and cash flows broadly across the expanse of our uniquely diversified and increasingly global health care portfolio. We won’t get into specifics now, but at this distance we see more tailwinds than headwinds.

As was the case heading into 2018, the tailwinds in our businesses are largely generated internally, coming from strong and diversified growth across our five distinct pillars, all aimed at achieving our longstanding mission. To achieve this growth, our businesses will continue to make deeper investments in quality improvements, technology deployment, delivery system optimization, consumer-centric financing mechanisms and other innovations to improve the value individuals receive from the health system. These investments will also serve to lower our cost structures, improve NPS and enable sustained growth and differentiated value for years to come.

As to headwinds, we expect the policy debates surrounding coverage expansions and health care costs to continue into next year. Additionally, the return of the health insurance tax in 2020 will cause higher premiums and lower coverage levels for people, and we will be advocating on behalf of our customers and consumers for a delay or outright repeal of this tax.

As solid as our performance may seem, we are not satisfied, given our organization’s capabilities and capacities to serve. Despite strong top-line growth and results, we are not performing at, nor consistently growing to, our full potential. This has, and will continue to be, an area of intense focus for our business leaders.

Perhaps even more critical from my perspective, we must work enterprise-wide to improve our speed and agility, so the pace of innovation and change better reflect our restless drive to deliver even more value to those we serve and unleash the full transformative impact of this enterprise.

We will provide some initial direction on 2019 in our third quarter earnings call, followed by a full review at our annual Investor Conference on Tuesday, November 27. We hope you can join us there. Now we will open the call for your questions. One question per caller please so we can get to as many as people as possible.

[Operator]

[Operator Instructions] We will take our first question from Justin Lake with Wolfe Research. Please go ahead, your line is open.

[Justin Lake, Wolfe Research]

Thanks, good morning. My questions are on reserve development. Given the relative lack of prior and intra-year development in the quarter, I was hoping you could give us some increased color on cost trend and reserve development across the commercial Medicaid and Medicare segments. And then just to make sure we understand prior year development trends overall can you tell us what percentage of claims if any you have you set each quarter for adverse deviation to your reserves, I think most companies talk about mid-single digits, but just wanted to confirm yours. Thanks.

[David Wichmann, Chief Executive Officer]

Okay, there is Jeff Putnam.

[Jeff Putnam, Chief Financial Officer, UnitedHealthcare]

Good morning. Thanks for your question Justin. Starting with development, we maintain our reserving process as you know that’s tightly controlled and consistent over time, and we're very comfortable with our reserve position at the end of the quarter and really pleased with the overall accuracy of our reserve-in over time. When you look at our year-to-date development because second quarter was fairly modest, but when you look year-to-date as a percentage of our medical, prior year medical experience it is right in-line where we are historically.

As that works into trends, we are always very respectful of trends, but as we stand right now we’ve not seen anything to date that would inform or change our view on commercial medical trends for the year by cost category or in total, and we don't get into details on trends in Medicare and Medicaid businesses, but I could offer a couple of comments.

Medicare trends generally stable with the last year and we are seeing some elevated consumption over time, similar to last year related to the market leading growth that we’ve had and Medicaid trends also really need to be looked at state-by-state as always there are some areas with increased trend and then we are working to manage those down, but nothing really notable to call out on those.

[Justin Lake, Wolfe Research]

The Medicare trend you mentioned, can you just expand on that like what would drive that in terms of your market leading growth? I apologize.

[Jeff Putnam, Chief Financial Officer, UnitedHealthcare]

Maybe, I could ask Brian Thompson to speak to that.

[Brian Thompson, Chief Executive Officer, Medicare & Retirement]

Sure. Hi, Justin. Brian Thompson here. Again, we're really not seeing any trend of the emergence in 2018, I want to make that clear. What we're seeing is very consistent with what we saw in 2017. I think the point is, given our market leading growth, we do prepare for and have seen a utilization uptick as we grow meaningfully compared to the rest of the market. We see that both in the form of new enrollees, as well as our improved retention and are holding onto folks later in life. So again, what we're seeing in 2018 looks a lot like what we saw in 2017 and 2016 that’s been the 4Q and now for strong market share gains and provides a very credible good baseline for us as we look forward to 2019.

[Justin Lake, Wolfe Research]

Thank you.

[David Wichmann, Chief Executive Officer]

Next question please.

[Operator]

We'll go next to Sarah James with Piper Jaffray. Please go ahead. Your line is open.

[Sarah James, Piper Jaffray]

Thank you. My question is on the 2019 commercial environment. On the last call, you had mentioned the national account RFP pipeline is larger than normal. Is that …

[David Wichmann, Chief Executive Officer]

Sarah, we are having a hard time hearing you, so can you – you may be on a headset or something, can you…

[Sarah James, Piper Jaffray]

Sorry, is that better?

[David Wichmann, Chief Executive Officer]

Yes, it is, thank you.

[Sarah James, Piper Jaffray]

So, my question is on the 2019 commercial pricing, on the last call you mentioned that the national account RFP pipeline was larger than normal, there have been some concerns as I believe which I think pricing, so, could you walk us through how you are seeing national account small and middle market develop?

[David Wichmann, Chief Executive Officer]

Sure. I think the question relates to national accounts pipeline and development team.

[Dan Schumacher]

Sure, thanks Sarah good morning. So, on the national accounts front, as we continue to progress through the selling season, I think I shared last quarter and would likewise amplify this quarter is that it is really a theme around incumbency that continues to be as we progress to the selling season. At this point, I would tell you that we’ve had some nice new client wins, as well as expansions in existing clients, but we’ve also had some client leave us as well, and obviously there is still more to be resolved in the selling season.

We are doing well again to convert retirees to group Medicare offerings and likewise we continue to do very well in the middle market segment as we work through the year. So, that is sort of the self-funded national account profile. I think you also were asking a bit about the pricing environment and as it relates to commercial risk-based offerings. And from our perspective, we are happy to see as we had told you last quarter, we would expect to return to growth in the commercial risk-based group offerings as we progress through the year. We did that in the second quarter and had nice contributions across all market segments from individuals, small groups through to middle market as well.

So, as we look at that environment it is competitive, it has been competitive. We always have pockets of competition that we’re responding to, but we find ourselves well positioned and well served by our broad footprint both geographically, as well as by market segment and funding status. As we talked about in this form for some time, we’ve done well to expand our product portfolio really along that value and price continuum and increasingly aligned that to get providers that are high performing. So, hopefully that gave you some color on what is happening both in the self-funded and the fully insured segments in the commercial markets.

[David Wichmann, Chief Executive Officer]

Thank you, Sarah. Next question please.

[Operator]

We'll go next to Dave Windley with Jefferies. Please go ahead. Your line is open.

[Dave Windley, Jefferies]

Hi, good morning. Thanks for taking my question. Wanted to flip over to Optum, the kind of two-part are here, so the first part, OptumInsight margin has performed very well year-to-date, wondered if you could talk about either pricing or mix of business drivers of that? And then secondly and more broadly as Andrew talked about Rally and the uptake of different technologies, how do you think about broadening the uptake or the adoption rate of your technologies in an environment where we might see competition directly from a technology company?

[David Wichmann, Chief Executive Officer]

Okay. We will take both those questions. Tim you want to take the first one?

[Tim Wicks]

Sure. Happy to do that. Dave thank you very much for the question. So, on OptumInsight, as we think about the quarter and we think about the margin growth it really is two items. One, you referenced pricing and mix and there is a significant amount of mix opportunity that is occurring in terms of growth of business around the risk and quality businesses, as well as payment integrity, and then the second area that is also important and continues to be important, you heard us talk a significant amount in 2017 about the discipline that we drove financial discipline and overall cost management, and that’s really coming through the business. Frankly, all across Optum, but specifically an OptumInsight in the quarter as well.

[David Wichmann, Chief Executive Officer]

Great. And then if I can I will just make a few remarks on Rally as well. Thank you for the question. Rally as you can tell in the script is something that we're very proud of having developed over the course of last four years. Obviously, there was a lot of work that went into in advance of our alignment with them, but they’ve done a very nice job of taking a single product company and making it multidimensional along the lines that Andrew has described. So, we are seeing probably the very fast uptake and in fact accelerating uptake of that business as we expand our offerings to respond to greater levels of consumer need.

So as an example, when we gave Rally the responsibility for our premium designation program, which is effectively the way in which consumers search for and find a physician and/or other care services we gave that responsibility we also started to appeal to a broader group of consumers, which dramatically increase the registration rate across that platform now sitting at I believe somewhere around 18 million people are registered with Rally today.

So, we believe that the expansion of the value that is offered on the Rally chassis is the single best way to get there and that really requires that we continue to provide a significant value to consumers both in terms of cost containment, but also in terms of the improved health that they each received. So, we’re continuing to expand and diversify that offering keeping it simple for people and we look forward to the developments that we will see with the individual health record and how that drives next best action and to the consumers that we serve and expect to see increased utilization as a result as well.

[Dave Windley, Jefferies]

Thank you.

[David Wichmann, Chief Executive Officer]

Thank you, David. Next question please.

[Operator]

Our next question comes from Peter Costa with Wells Fargo. Please go ahead.

[Peter Costa, Wells Fargo]

Good morning. Thank you. My first question is regarding Optum. Andrew welcome aboard in your first quarter in the hot seat, and I kind of want to understand what you expect to be different about growing Optum going forward under you relative to how it’s grown in the past? And then if you could in the quarter itself the growth in revenues at Optum slowed down from the first quarter, can you spike out how much of that was related to M&A?

[Andrew Witty, Chief Executive Officer, Optum]

Sure. Peter thanks very much for the question. I’ll ask Tim in a second to address your second part of the question, but in terms of the first, obviously very early days for me here at Optum, I them terrific foundations have been laid over the last seven or eight years in terms of the asset base of this company has is rarely, I think unparallel in terms of the portfolio of assets that we have. As we look forward, I think the opportunity is going to be very much centered around how we start to drive the gearing between all of these assets to really bring to life the full potential of this portfolio.

And I think what we see, a very high level is significant at direct local interface as care provider and touch points with patients and consumers. So, a business with a real face backed up with an extraordinary evolving digital capability, which then allows us to drive high frequency contact really all underpinned by tremendous commitment to care and delivering quality of care, commitment to bringing down total cost of care and ensuring all of that is done in an extraordinary high-quality way.

So, I think all of those tenants of the business, which have got us thus far are going to be absolutely the characteristics going forward. What I’m focusing on now of course is really making sure I understand all of the various parts of this business, working with the team to figure out the next steps, but it is going to, I think be characterized very much in the way I just described. Maybe, I could pass to Tim to answer the more specific question on the quarter.

[Tim Wicks]

Sure. Peter, thank you for the question. First, what I would say is, as we look at the growth rate of revenue at Optum both year-over-year and sequentially it is in-line with our plans in both of those ways of looking at it. The revenues of 24.7 billion were up 9% or up 2.1 billion, compared to a year ago with both OptumHealth and OptumInsight posting double-digit growth rates and with OptumRx posting a 7% growth rate year-over-year.

In each of those businesses, organic growth was very strong, both in OptumHealth, in terms of care delivery with market expansion, as well as OptumServe volume growth and then behavioral health and then in OptumInsight, strong growth with the addition of the advisory board, but also pretty significant volume growth in terms of our risk and quality business and then also volume growth and payment integrity.

Also, when I mentioned OptumRx earlier in the overall revenue growth there, I think it is important to understand that that’s driven by new sales growth in terms of new clients that have come on, as well as very strong expansion in terms of specialty as well. So, really solid growth across the businesses and in-line with our expectations.

[Peter Costa, Wells Fargo]

I was hoping you would spike out quantitatively exactly what the growth was from M&A this quarter versus the growth last quarter.

[Tim Wicks]

We don't spike that out specifically Peter, but I would tell you it’s not an appreciable difference.

[Peter Costa, Wells Fargo]

Thank you.

[David Wichmann, Chief Executive Officer]

Okay, thank you Peter. Next question please.

[Operator]

We’ll go next to Steve Tanal with Goldman Sachs. Please go ahead.

[Steve Tanal, Goldman Sachs]

Good morning guys. Thanks for the question. I just wanted to follow up on sort of the decline in ASO, coupled with another strong quarter of growth in the group risk business. Can you give us a sense of what you're seeing out there, has that sort of decades long shift ASO stalled or slowed or are you seeing greater demand for group risk products now and if so, why do you think that is? And just in this context, if you could comment on Nexus ACO, I'd be really curious to hear what’s happening there? Thanks.

[David Wichmann, Chief Executive Officer]

Dan?

[Dan Schumacher]

Sure, thanks Steve. This is Dan Schumacher. You had a few things tucked in there, but first just on the quarter and the decline with regard to self-funded enrolment. In reality, there is, it is just sort of the normal seasonal pattern, particularly in our international accounts and quarter-based attrition. So, if you look at that outcome it compares into the average of the last 5 or 10 years it is very much in keeping with that.

So, really just the normal seasonal pattern we see on the ASO front. I think you had asked about is there an acceleration or a change in the trend in the migration from fully integrated to self-funded. That continues to be a recurring theme I would say, it's sort of add a comparable pace to what we’ve seen over the last several years.

So, I wouldn't spike out any acceleration or deceleration in that. We don't believe on the fully insured side to see greater take-up rights, what we’re doing there is we are actually taking market share, and I think that large contributor to that is really the work that we’ve done as I had mentioned before around expanding our product portfolio around that value of continuum and then making sure importantly we pair it with really high performing care delivery partners both OptumCare, as well as externally, and then improving as we have talked about the consumer experience and making it simple and personal for them.

You had asked I think also about Nexus ACO. We continue to build that product and are excited for the prospects and just as a reminder for those on the phone that Nexus ACO offering is really a national accountable care offering. So, we string together our best solutions locally onto a national solution. Today we've got about 75,000 enrollees on that. We’ll double that as we turn into the year and we look to double that again by the time we get to the end of 2019. Thanks Steve.

[David Wichmann, Chief Executive Officer]

So, really Steve what you’ve hit on is this category of growth for us, pillar of growth around consumer centric benefits, and Nexus ACO would be one example, but if you look to the distinguished group insured growth over the course of the last three years or so, and why we are bullish on growth going forward it’s really because of these new designs that were progressively putting in the marketplace and may be tied to the question to before that. Our ability than to use digital assets and other ways to engage consumer around lifestyle behavior modifications creates a great attraction to these products as well. Thank you for your question. Next question please.

[Operator]

Thanks. We will go next to Michael Baker with Raymond James. Please go ahead. Your line is open.

[Michael Baker, Raymond James]

Yes, thank you. I was wondering if you could outline some of your promising venture investments in-light of your drive to reshape the future health care.

[David Wichmann, Chief Executive Officer]

We’ll start with David Wichmann.

[David Wichmann, Chief Executive Officer]

Yes sure. So, Optum Ventures they generally invest in visual health companies that use data and analytics to improve consumers access to help the healthcare services and health care across the board. Also, Ventures really invest in things that make the health care system more reliable and easier to navigate. The Ventures investments are focused on I would say four main areas, health analytics, digital on-demand, consumer focused health, and healthcare system management. I would also say and conclude that there is lot of synergies between Optum and Optum Ventures, Optum providing a good scalable platform to test Optum Ventures and Optum Ventures is being able to sort of give us some shots in the arm with respect toward Digital agenda.

[Michael Baker, Raymond James]

Thanks [indiscernible].

[David Wichmann, Chief Executive Officer]

I would just add a little bit to that if I can. We also build businesses organically as well inside our company and maybe just comment on a couple. One would be a business [indiscernible] we are advancing new platforms for dialysis really trying to promote home-based dialysis and use, as well as trying to drive greater value to consumers in that whole category if you will. And then at this time, I would also mention when we announced this in the last couple of weeks where we created a company called, along with our venture partner alumni, created a company called [indiscernible], which is an on-demand healthcare insurance platform, which I would characterize as being pretty revolutionary in terms of the potential that holds to fit a particular market segment in the group insured marketplace, as well as self-funded market as well. So, those are a couple of additional examples. These are the things that we hope to profile for you to a greater extent when we get together in November. Next question please.

[Operator]

Next question is from Kevin Fischbeck with Bank of America Merrill Lynch. Please go ahead.

[Kevin Fischbeck, Bank of America Merrill Lynch]

Great, thanks. I want to ask you about the guidance because I struggled a little bit with the guidance that’s happened so far year-to-date because Q1 you raised guidance by less than a beat in Q2, you basically raised guidance with the beat, even though announcing a few pretty big deals during the year, Banmedica, Sound, a few other things that are probably at least a third of what the full guidance range has been. So, I wanted to see if you could kind of rectify why, you know the guidance hasn't been raised by more given the tailwinds from M&A and then given a fairly pretty solid trend so far in the first half of the year? Is there anything you would highlight as you know one-time in the first half or a headwind coming in the second half?

[David Wichmann, Chief Executive Officer]

Thanks Kevin. I think we’ve actually raised expectations pretty strongly over the course of this year. So, twice by total of about $0.175 [ph] at the midpoint and that’s despite some pretty substantive flu pressure and a new HIPAA effect that we’ve identified in the first quarter of around $0.22 or so. So, the way we look at it at least from my vantage point we’ve raised it by about $0.40 or so, so far this year.

So, but I think importantly as we look to the balance of 2018 we’re focused on growth, we’re continuing to focus on cost containment and achieving the full potential this enterprise capacity is, and you could see that we are deeply investing in innovation to drive constructive measured change and improve healthcare economics in both North and South America.

So, we are also focused on these five areas of growth advancing quality, driving MPS or measured by MPS I should say, and again continuing to invest and diversify our businesses so that we can achieve a long-term sustainable growth rate that we have outlined for you in the past of which we remain deeply committed to as well. We did buy Medicare in the first quarter that Medicare is interesting for us, right now it is in winter. So, not particularly accretive in the second and third quarter of the year, it happens to bare the same characteristics as the UnitedHealthcare Brazil businesses as well.

So, we don't see a lot of material improvements in our results as it relates to that and they will start to see that closer to the fourth quarter or so. But part of what I laid out as well is that and maybe this is what you’re suspecting is that the company has so much potential given its assets and just performing to its full potential is our ambition and that is what this team is aiming to achieve. So, we will continue to get after cost, we are going to continue to get after growth, and diversifying and growing our business and importantly investing in it for the long term. So, we can serve more people and so more health systems better. Thanks, good for your question. Next question please.

[Operator]

We’ll go next to Lance Wilkes with Sanford Bernstein. Please go ahead.

[Lance Wilkes, Sanford Bernstein]

Yes, good morning. I had a couple of questions or question on the PVM in particular, I was invested in understanding for margin in OptumRx, looks like margin was up for the quarter although cost of product was also up, so I was just interested in some of the drivers of that and then I guess related to the long-term view there, how are you looking at the online pharmacy strategy of United overall and with an entrant like Pillpack and Amazon, what's your view as far as adding them in network, partnering with them et cetera? Thanks.

[David Wichmann, Chief Executive Officer]

Great question Lance. Appreciate it. John Prince, do you want to take that?

[John Prince, Chief Executive Officer, OptumRx, Inc.]

Sure. Lance, John Prince, CEO of OptumRx. Thanks for the question. Maybe just talk about the margin in general. We are comfortable with our long-term outlook of 3% to 5%. I think when we see in different quarters, you see a variation with mix over time. The product is really driver of our specialty home-infusion and those really drive our business in terms of the product mix and so I think it will fluctuate over time, but ultimately, we're comfortable with our long-term outlook and also comfortable with how we’re executing on the market from an overall perspective.

In terms of online pharmacy, we work with various partners across the healthcare system. We have been very focused on our consumer experience in our home delivery, our specialty and our infusion business, that has been the key driver of our growth over the last year and a half. We have done exceptionally the job of improving our MPS in those areas. We have become hyper-local.

Those businesses where we are in the market and so if you look at our strategy, we retain home delivery specialty in fusion, wherein a 35 mark has been hyper-local we’ve added six this year, we are going to add six more this year. We see the market relates pivoting to be in both same day and next day service. We’ve been investing heavily in that, and I think we’re flexible based on how consumer wants to work with us in terms of whether they want to be online digital in the market etcetera. And I think we’ve got a good strategy to execute against that. Thanks for the question.

[David Wichmann, Chief Executive Officer]

Thank you. Next question please.

[Operator]

Next question is from A.J. Rice with Credit Suisse. Please go ahead.

[A.J. Rice, Credit Suisse]

Hi, everybody. So, I thought at this point maybe just to ask about the comment you made towards the end Dave in your prepared remarks where you talked about restless drive, I think the comment was not satisfied with the performance of few areas where we could better and then I think also maximizing performance consistently. I mean, you’ve done 28% EPS growth in the first half, pretty good by most standards for this industry, what are the areas where you think you are still underperforming and what are you sort of referring to with those comments?

[David Wichmann, Chief Executive Officer]

Thanks for the question A.J. Appreciate it. I think we have highlighted some of those today. We didn't really talk about in terms of levels of disappointment, but I think it is fair to say that we are not particularly pleased with how we have done the large case ASO marketplace overall. If you look at our performance over the course of the past years and it is not reflective of the winning capabilities of this company, and so that is a good example of a place that I think we need to improve. Very satisfied with our MPS performance, but extremely anxious to get that moved up and at the same time manage the interchange of that with the evolutions that are required in order to respond to consumer demands.

So, figuring that out is one of our challenges and I’d say maybe another one is just the pace at which we are driving adoption of the use of technology and digital broadly and by most measures there is nothing wrong here. I don't want to leave you with that point-of-view, but by most measures with the company of that capacity that this one has, I just believe we should be able to move faster with greater speed and agility to respond to emerging market demand for these kinds of services.

We are well up front with all of them, but my view is we need to get these into the hands of the consumers faster and make a bigger difference on how the effectiveness of health systems and the health of people. And so maybe just call, chuck it up a little bit to having maybe higher expectations than what we’re currently achieving, largely because we have a good inside view of what the internal capacities are of this enterprise overall. So, expect this to step it up.

[A.J. Rice, Credit Suisse]

Okay. All right. Thanks a lot.

[David Wichmann, Chief Executive Officer]

Next question please.

[Operator]

And we will go next to Josh Raskin with Nephron Research. Please go ahead. Your line is open.

[Josh Raskin, Nephron Research]

Hi, thanks. Good morning. Wanted to ask on two specific growth opportunities in 2019, the first around Medicare Advantage. And now that you guys have submitted your bids, I'm just curious there's a thought around relatively generous reimbursement, especially relative to what we've seen over the last decade or so and how you think about the Medicare Advantage market overall and then United within that. And then the second area, just public exchanges, individual public exchanges, curious if you guys are getting more interested or I guess that would be any interested in potential expansions there and how you're thinking about that market over the next couple of years?

[David Wichmann, Chief Executive Officer]

Thank you, Josh. Brian Thompson will take your first question.

A - Brian Thompson

Thanks, Josh. Brian Thompson here. As I mentioned last quarter, certainly encouraged by the direction of the 2019 rate, it's up nearly three points versus last year and then you complement that with some policy changes around the framework that provides greater flexibility around how we can define benefits all good for seniors. As you mentioned, I do think that ushers in an opportunity in 2019 for an environment that will provide stronger coverages and innovations and benefit enhancements for the senior serve [ph]. So, should be great for MA. As I think about our position in it, we will approach 2019 with an expectation of continuing the momentum that we've demonstrated over the last four years with share gains in 2019 as well.

[David Wichmann, Chief Executive Officer]

And as it relates to exchanges, maybe I'll just take that one. I think Josh as we've said in the past, first of all our decisions are made state by state and as you know we have a very modest presence overall. I want to kind of reaffirm that nothing has fundamentally changed since we made our decision several years back now, which has absolutely turned out to be the right one for us.

And as always, we'll evaluate for future participation on a market-by-market basis. One thing you may read is, that there was some noise out there about us joining the Massachusetts Exchange. I just want you to know that that was largely due to our small group penetration having grown to a point where we were required to participate in that exchange. So, it wasn't necessarily a voluntary decision on our part. Thanks for the question. Next questions please.

[Operator]

We will go next to Ralph Jacoby with Citi. Please go ahead.

[Ralph Jacoby, Citi]

Thanks, good morning. Just want to go back to MLR, moved higher than we expected, obviously lots of moving parts. Can you maybe just talk about whether you've seen a bit of an uptick in maybe cost per claim or acuity? And it would be helpful to break out the 6% trend between what you're seeing in terms of utilization versus unit cost and then the last piece, just if you can give us a sense of how much then Medicare and seasonality there may be impacted MLR in the quarter? Thanks.

[Tim Wicks]

Thank you, Ralph. Quite a few questions inside that Ralph, but thanks for the questions. First on MLR, just to say that, that was right in-line with our expectations and as we noted earlier, there is - we're not changing our outlook for the full-year at all and the year-over-year change is an element that we described, the insurers' tax impact is favorable and then business mix and the less favorable development go on the other direction. As far as acuity, we would - overall acuity in aggregate is in-line with our expectations out there as well.

What you'll see over time though as we work hard to keep moving lower acuity in each category to its appropriate place of service that what remains in each category will naturally have a little bit upward pressure on acuity inside those categories. No change in our view on unit cost versus utilization, still it's 4% primary driver being the unit cost and 2% of utilization. And then I think the last piece was Banmedica, I think Dave touched a little bit on that earlier from given the size of Banmedica against our total medical expense base, it's really not a material factor at this point.

[David Wichmann, Chief Executive Officer]

So, you should conclude from this that the trends are very much in-line with our expectations for the year. Our teams are performing very well containing health care costs and they are pricing to a forward view of trends, very consistent with the actions that we've taken in the past. You should also take it as it relates to our last comment around international, that our international businesses in South America are performing very well, very nice growth year-over-year, offer strong baselines, good start for Banmedica as well. Next question please.

[Operator]

We will go next to Gary Taylor with JPMorgan. Please go ahead.

[Gary Taylor, JPMorgan]

Hi, good morning. Just a quick two-parter. Any specific comment on days claims payable being down just to touch and then the second point is, we've kind of tiptoed around to talking about trends and I've heard and appreciate all your comments, but I just wanted to specifically ask on hospital trend given the flow of profit hospitals saw such a marked acceleration of same-store revenue in the first quarter, it's with a little more visibility at this point is, if you have seen in fact just on the hospital piece, any pickup in that trend?

[Tim Wicks]

Gary, I think I'll take that last one first and that we really have it when things are really aligned and consistent with what our expectations were coming into the year, and as we move throughout the year as well. The first part of your question with respect to the days, Jeff, do you want to take that?

[Jeff Alter]

Sure. Just to start by, as we mentioned, we're comfortable with our level of reserves here as of June 30, and it's 48.3 days, that's well within our expected range that you've seen us historically, which is typically been 47 days to 49 days other than the period where we had the individual ACA effects that elevated it up to closer to 50. And it's down year-over-year about a day when you bring it out to the decimal point there and there's a couple of things contributing to that. One is, we continue to see – we've talked about this earlier, a little modest reduction in provider claim submission timing, and also there was a timing impact from when we released capitated payments that are directly linked to risk and value revenue receipts that just changed from third quarter to second quarter relative to last year.

[David Wichmann, Chief Executive Officer]

Great. Thank you, Gary. Next question please.

[Operator]

And we will go next to Steven Valiquette with Barclays. Please go ahead.

[Steven Valiquette, Barclays]

Okay, great. Thanks for taking the question and good morning everybody. This is a little bit granular, but we are getting a few calls around the new expansion in 2018 of total knee replacement from just the in-patient to now the outpatient setting. So, I think at a high level, I mean there should be some cost savings around this, but there also could be an increase in utilization just because of the availability now in the lower cost setting. I'm just curious at high level what you're seeing around this phenomenon so far this year? Thanks.

[David Wichmann, Chief Executive Officer]

Maybe Andrew Hayek, who came to us from SCA can respond.

[Andrew Hayek, Chief Executive Officer, SCA]

Thanks Steve for the question. I'll offer some general commentary. I do think the CMS policy announcement is consistent with our overall view that more surgery, including higher acuity surgery will shift to the outpatient setting and alter the surgery center setting, and that's based on improvements in technology and surgical technique and aesthetic technique and all of that improves the quality experience of cost to care. So, from an SCA standpoint, we have been seeing a continued growth in total joint replacement procedures in commercial space. We are beginning to see that happen with needs from a Medicare standpoint, in terms of physicians preparing to shift those cases.

We know it’s really good for the patient in terms of quality and experience, very high NPS, fantastic quality outcomes, and then substantial cost savings. We've been seeing that on a commercial basis for a number of years and working very collaboratively with even health plans and we think that will be a great benefit to Medicare over the coming years. And we expect them to continue to widen the range of procedures that are eligible for our patient. So, all the right thing to the patient and for the health care system.

[David Wichmann, Chief Executive Officer]

Which is one of the reasons why we invested in SCA, which we viewed as the right ambulatory surgical platform properly positioned in the higher acuity surgeries that were offered in those settings, and to have great ambition for its ability to expand and need to meet some more people with higher quality and greater levels of consumer satisfaction. Just as a reminder, SCA operates in 91 NPS zone. So, very progressive and doing so while saving consumers about 50%. Next question please.

[Operator]

Our next question is from Ana Gupte with Leerink Partners. Please go ahead.

[Ana Gupte, Leerink Partners]

Good. Thanks for taking the question. Good morning. The question is on drug pricing reform and if you have any change in your plans or actions to aid the administration's agenda on overall spending specialty RX, transparency and out of pocket for seniors. You have the largest set of capabilities at scale with Medicare Advantage, bundled with Part D, the largest – big three integrated PBM and BFRX [ph], I was just curious?

[John Prince, Chief Executive Officer, OptumRx, Inc.]

Thanks Ana, it is John Prince, CEO of OptumRx. In terms of overall drug pricing, we are very focused on lowering drug cost for consumers. And as you know Ana, our strategy is focused on where in that cost of drugs, decrease in total cost to healthcare and really creating a transformative consumer experience. And that is very aligned with what is happening in the broader market. So, in terms of what we're focused on, we're very focused on initiatives that bring down the list price of drugs, but more importantly, the net cost of drugs. So, a lot of things that we even focused on are providing out ideas around what we're doing exactly.

So, as you know, in the second quarter beginning – in the late first quarter, we started drug-to-consumer pharmacy discounts at healthcare that impacts 7 million people, I think David talked about it in his script. That impacts people from all effective cost. We've been very focused on investments and please check my script. That now is being used by almost 100,000 physicians in the market that directly links into the electronic medical record that is helping in transparency, it gives the doctor an idea of what is on formulary, how does that cost, is there lower cost alternatives. We are very focused on value payments, we are heavily focused on – we got 15 of those in the market right now and continue to expand that.

And lastly, we're very focused on our drug negotiations and encouraging our pharmaceutical partners to lower the list price. And so, we've been working with people as they come to market with products to have a lower list price and when people have done that, we've put them preferred on the formulary. So, it gives you a series of examples that we're very focused on reducing our cost, improving total cost to care and we've been doing very practical things in the market to make that a reality.

[Ana Gupte, Leerink Partners]

Thanks, John.

[David Wichmann, Chief Executive Officer]

Thank you. Next question please.

[Operator]

We’ll go to next to David MacDonald with SunTrust. Please go ahead.

[David MacDonald, SunTrust]

Good morning. Thank you. Just one quick question on Global. I was wondering if you guys could spend a minute on what you're trying to do at the local level to increase the penetration of private insurance and also what you're doing more at the national level to try and drive increased public private collaboration with these governments? Thanks.

[David Wichmann, Chief Executive Officer]

Great. We'll have Molly Joseph, our Chief Executive of UnitedHealthcare Global respond.

[Molly Joseph, Chief Executive, UnitedHealthcare Global]

Sure. So, our focus is around our Latin America platform and there we really see a very strong demand for access to private healthcare and a limited supply of affordable private health care. And our core capabilities create tremendous value across affordability, access and outcomes for those that we serve. Our businesses in these markets are broad, they are diversified and they are scaled. And that is both from the health benefit perspective and from a medical delivery perspective. And we work to use these platforms in combination with our enterprise core capabilities, to advance healthcare modernization, make care more affordable and make it more effective for those that we serve. In doing that, we open up access to serve broader segments of the private healthcare market and over time, we earn trust to serve these markets more holistically by partnering with government.

[David Wichmann, Chief Executive Officer]

I think one of the strongest examples of that is our public private partnership in our hospital in Portugal as an example, where we're leading on quality and provide a very cost-effective solution working with government to serve the needs of the people of Portugal. And Molly and her team has really done a nice job and particularly you saw on the script around innovation and bringing new innovations to the market.

What you're starting to feel is the introduction of information analytics, use of digital capacities, increased product modernization and designs in countries that have historically not had a great deal of diversity of offering. So that helps to create demand for all folks and you have access to private health systems and serves the needs of multiple different price point expectations that those consumers have. So, we're very pleased with the work that they've done. Next question please.

[Operator]

And we’ll go next to Matt Borsch with BMO Capital Markets. Please go ahead.

[Matt Borsch, BMO Capital Markets]

Thank you. If I could just – sorry this is on a very technical near-term data point, but maybe in response to the first question that you had in the Q&A session here on the reserving, I guess what I'm just trying to understand is, clearly there's a positive bias that was again this quarter to your reserve development. But is there a specific margin for adverse deviation, if that's the correct term I'm using that, that you target or is there some – or should we expect that zero is in your view the best result as we move ahead?

[David Wichmann, Chief Executive Officer]

Jeff?

[Jeff Alter]

Thanks for question Matt. That's not something we disclose publicly, that said it is not zero. We do have a target and it's been very stable over the years built up by business for adverse deviation.

[David Wichmann, Chief Executive Officer]

Yes, and where that really shows itself is when you carry over from over a year. It doesn't really show up quarter-to-quarter, it shows up going from Q4 to Q1 and less dramatic when you get into Q2. Our development as indicated in the script, it really relates to Q1 this year and it's not all that different from the development that we experienced in Q2 2017, related to the first quarter of 2017 as well. Thank you, Matt. Next question please.

[Operator]

And we’ll go next to Mike Newshel with Evercore ISI. Please go ahead.

[Mike Newshel, Evercore ISI]

Thanks. I wanted to ask how much headwind from the health insurer fee moratorium you're expecting in the back half of the year from bigger commercial renewals. Dave, I think you mentioned a $0.22 impact earlier, is that right? And was any of that absorbed in the first half of the year?

[David Wichmann, Chief Executive Officer]

The $0.22, I'm sorry to confuse you, it really related to the impact of flu combined with that. I think this specifically, the hit component was what $0.06, $0.07 something in that zone, if I recall correctly, Mike.

[Mike Newshel, Evercore ISI]

Got it. And then, most of that falling in the second half of the year, but small?

[David Wichmann, Chief Executive Officer]

That's right. Yes.

[Mike Newshel, Evercore ISI]

Thanks.

[David Wichmann, Chief Executive Officer]

Thank you. I believe that concludes the questions for the day. We accomplished one of our performance metrics and that was to make sure that we were able to answer all of your calls – all of your questions, excuse me. And so, I appreciate them, they were all very good. So, – but to sum up our report for the second quarter, the people of UnitedHealth Group, Optum and UnitedHealthcare executed well on our strategic path, improving quality, affordability and consumer satisfaction for the people we serve resulting in growth and reliable return for our shareholders.

Revenue, cash flow, earnings and importantly, NPS scores continue to advance. While we recognize there is much more to be done to reach the full transformative potential of our enterprise, we are committed to help positively reshape healthcare, to be higher quality, more affordable simpler and of higher value to people. We are confident that we will continue the strong performance in the second half of this year in 2019, 2020 and for many years to come. Thank you again for joining us today. This concludes our call.

[Operator]

And this will conclude today's program. Thanks for your participation. You may now disconnect.