Good morning and welcome to the UnitedHealth Group Third Quarter 2023 Earnings Conference Call. A question-and-answer session will follow UnitedHealth 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 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 and earning reports section of the company’s Investor Relations 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 October 13, 2023, which may be accessed from the Investor Relations page of the company’s website. I will now turn the conference over to the Chief Executive Officer of UnitedHealth Group, Andrew Witty.

Good morning, and thank you for joining us. The third quarter results we reported today reflect well-balanced and durable growth, supported by disciplined execution, and a steadfast commitment to ensure high quality comprehensive care is well within reach for every person we're privileged to serve. Evolution in our marketplace, including regulatory changes, means agility and adaptability must continue to be defining characteristics of our company. The people of Optum and UnitedHealthcare continuously strive to find new ways to innovate, serve, and grow. As a direct result of their mission-driven focus, this year we'll serve even more people more comprehensively than anticipated in the outlook we offered at the end of 2022. By the close of this year, we will serve nearly 900,000 additional patients under value-based care arrangements at OptumHealth, almost one million new consumers across UnitedHealthcare’s Medicare Advantage offerings, and a total of more than 1.5 billion scripts to the people who rely on OptumRx. Based on this performance, we're strengthening our 2023 adjusted earnings outlook to a range of $24.85 to $25 per share. The confidence we have in our sustained long-term growth outlook is exemplified by the 14% third quarter revenue increase we reported this morning, more than $11 billion above last year. The sources of this growth will drive many more years of strong performance. Value-based care is the centerpiece of our long-term strategy, precisely because it delivers on the promise of high-quality clinical outcomes and experiences at lower cost than traditional models. This year, we expect OptumHealth will serve more than four million people in fully accountable relationships, almost twice as many people as we served just two years ago. Many of these patients have serious health challenges, few economic resources, and until now often had limited access to care or the type of care they truly need. Ramping up to engage these patients requires significant upfront investment and high touch reach. These early efforts ensure we can address patients’ unique needs and design personalized care plans that drive better health outcomes, increase quality of life, and deliver cost savings throughout the health system. Making investments to serve people who have endured far too many barriers to care is an easy choice for us all. In 2023, you have seen both our commitment and financial capacity to invest to further enable our ability to serve and to grow far into the future. In recent years, we've invested significant resources in building our capabilities to care for people most effectively for the life or health stage they find themselves in, whether they need preventative or palliative care or are best served in a clinic at home or virtually. In particular, we're advancing our ability to care for people in their homes and integrating that physical care with our pharmacy and behavioral offerings. This work means developing an even more versatile clinical workforce to serve consumers in more ways through clinic-based Optum care delivery capabilities and extending our reach to consumers, who may not have ready access to physical clinics. Medicare Advantage continues to be a powerful force in driving superior health outcomes for consumers and in helping to lower costs at the system level. Today, about half of all seniors in the U.S. have chosen Medicare Advantage over traditional Medicare, and that number will continue to expand for very good reasons. The results are well documented. Medicare Advantage outperforms traditional fee-for-service for seniors on many measures, including lower rates of hospitalization. And they spend up to 45% less out of pocket, compared to those in Medicare fee-for-service. Importantly, this high value for consumers is delivered at a lower cost to the health system. UnitedHealthcare serves more people in high quality, four-star and higher Medicare Advantage plans than any other organization. Looking to the 2024 enrollment period, which begins Sunday, we're confident our offerings will again resonate with consumers as they prioritize high-quality care and stable benefits. In the reduced funding environment health plans face, I credit our teams for investing in the areas consumers value most, including zero-dollar premium plans, no copays for primary, virtual, and preventative care, and no copays for hundreds of the most commonly prescribed drugs. I want to highlight one more aspect of our growth story, the consistently strong performance of our pharmacy businesses. Pharmacy, as you know, is the most common consumer touch point in healthcare. What consumers and employers want more than anything is access to the most effective treatments in the moment they need them for the lowest possible cost. OptumRx is delivering on those expectations. This most recent selling season is on track to be among our strongest, reflecting a combination of new clients and retention rates in the very high nineties. And as the coming season for 2025 develops, we're expecting another year of robust growth. Our clients tell us they value the enhancements we are making to our pharmacy offerings, providing them transparency and choice, while also integrating new tools and capabilities. Notably, our pharmacy service offerings go far beyond the foundational benefit management capabilities and now account for about half of all OptumRx revenues. We continue to expand the reach of our community pharmacies and our diverse specialty and infusion offerings are growing double digits. Driving this expanding market demand is the enormous pressure facing employers, health plans, governments and others to manage and respond to manufacturer list pricing. The services offered by OptumRx and others are the only counterbalance to drug company pricing. The foundational business objectives for PBMs is to lower costs and make medicines more affordable and accessible for individuals and families. PBMs are the only entities in the drug supply chain with that exclusive focus and incentive, and we're honored to play this critical role. These pillars of our growth, value-based care, pharmacy, and our innovative benefits businesses, alongside our health technology and financial service capabilities, underpin our ability to develop ever stronger value propositions for the people, who receive and those who pay for care and support our confidence in a future of growth. And with that, I'll pass it to Dirk McMahon, our President and COO.

Thanks, Andrew. I recently hosted UnitedHealthcare's National Accounts Forum, where we bring together client leaders twice a year to share ideas and gather feedback. These are some of the biggest and most sophisticated companies in America that collectively employ and sponsor coverage for millions of people. And to no surprise, healthcare costs top their list of concerns, especially the rising cost of drugs. In addition, they want innovation, new tools to help their employees take full advantage of their benefits, achieve better health outcomes, and save money. And of course, it has to be digital. Let me offer a few examples of innovation that have fueled our growth outlook, starting with our mobile platform, the primary access point for millions of UHC members. Each year, we add new capabilities to provide consumers with increased on-demand care access, highly personalized information about their benefits, real-time support, cost estimation tools, integrated pharmacy capabilities, and enhanced rewards. Another example, our newest and fastest growing commercial offerings, which feature no annual deductibles and incentivize people to make good healthcare choices by offering an unprecedented view into quality and cost. When seeking care options, consumers see potential care providers' latest reviews and quality designations, and they see what they will actually pay for their care, which will help them make the most informed decisions. UnitedHealthcare members in these offerings are receiving more preventative care, while paying about 50% less out of pocket, compared to people enrolled in traditional offerings. And their employers can reduce the total cost of care with an average savings of 11%. These results are why such new offerings are among our fastest growing. Beyond these consumer-facing innovations, we're leveraging the latest technologies to create greater operational capacity and productivity, so we can better serve consumers and focus on the highest value work. Our teams are significantly improving how quickly we respond to the millions of benefit questions we receive each year. We are using AI and natural language processing to expedite call documentation, to rapidly generate accurate summaries of consumer interactions with our contact centers, saving millions of dollars in administrative work and freeing up capacity for our people to prioritize engagement. We're also utilizing these technologies to translate and interpret unstructured data, such as physician notes, which will help, for example, provide deeper insights for life sciences customers, so they can better assess the efficacy of their treatments. Of course, these are just a few of the hundreds of AI applications powered by OptumInsight we are actively developing, testing, and deploying today to further elevate the consumer and care provider experience, while driving increased quality and lower costs. And with that, I'll turn it over to our CFO, John Rex.

Thank you, Dirk. The growth we reported today is a direct result of investments made over many years to develop and connect the diverse health capabilities needed to serve the people who rely on us each day, while also creating the foundational capacity to serve millions more in the years ahead. This capability development has long been in the making, and it's still very much underway as the opportunities to serve more people, more deeply continue to expand. Before reviewing our business results, I'll offer a few brief comments on care activity. Care patterns remain consistent with the view we shared during the second quarter, with activity levels still led by outpatient care for seniors, and still most notably in the orthopedic and cardiac procedure categories. These trends remain stable at the levels we previously described. As we've noted, our outlook assumes these activity levels persist throughout next year. We continuously monitor a broad spectrum of patient acuity levels and have yet to see any other notable changes. For example, within oncology, the average stage at which we are first seeing cancer diagnoses remains consistent with historical patterns. As always, we remain diligent in looking for changes to the underlying health of patients. With that, let's turn to our third quarter results. Revenues of $92.4 billion grew by 14% over the prior year, with double-digit growth again at both Optum and UnitedHealthcare. Optum Health revenues grew by 29% approaching $24 billion, driven by an increase in the number of care services we offer and patients we serve, especially for those with complex care needs. Operating margins continue to reflect the initial clinical engagement activities that support the strong growth in patients we have realized this year, as well as the higher care activity patterns we have discussed. OptumRx revenues grew by 14%, approaching $29 billion, driven by the strength in our pharmacy care services offerings, as well as new customer wins. Script growth of nearly 7% reflects customer response to our innovative solutions, which focus on choice and lowest net cost. OptumInsight revenues grew by 35% to $5 billion. Revenue backlog of over $31 billion increased by more than $7 billion, in part due to the change healthcare combination. In addition, we recently announced a partnership to provide revenue cycle, analytics, and information technology services to a health system serving more than 400,000 people in the Midwest. Turning to UnitedHealthcare, our commercial business added nearly 700,000 people through the third quarter. Further, selling season indications are tracking favorably, particularly in national accounts. So as ‘24 begins, we expect to grow to serve an additional 1 million people with commercial benefits. Within our public sector programs, we expect growth of nearly 1 million Medicare Advantage members this year. And looking to the year ahead, we're encouraged by the consumer value, stability, and breadth of our offerings. And as always, we start with an expectation that we will outpace overall market growth. Our Medicaid performance remains strong as we support people and families through the redeterminations process. Our teams are really leaning in, speaking with thousands of consumers each day. Through a comprehensive outreach program, we are helping people navigate the process and connecting them with the resources they need to retain or reinstate their health benefits or to help them find other affordable coverages. A significant majority of the people we engage with are able to retain or reinstate their coverage. Our capital capacities remain strong. For the first nine months of the year, adjusted cash flows from operations were at $22.4 billion or 1.3 times net income. And in that same timeframe, we returned over $11.5 billion to shareholders through dividends and share repurchases. As noted, given the strength of our business performance, this morning we have updated our ‘23 outlook for adjusted earnings to $24.85 to $25 per share. And as we finish strongly in ‘23 and look forward to ‘24, we're intensely focused on execution, while further expanding our capacity to serve more people, more deeply, and building the foundations to support our growth objectives for years to come. Now I'll turn it back to Andrew.

Thanks, John. Before opening up for questions, I'll offer some preliminary observations about next year, while reserving most of this conversation for our investor conference on November 29th. Our businesses continue to build momentum while maintaining flexibility and adaptability for an ever-changing landscape, even as we invest for the future. We're focused on our strategic growth pillars and driving efficiencies throughout the enterprise at an accelerated pace. At this distance, analyst earnings estimates for 2024 reasonably reflect the performance view we expect to offer in November, with consensus near the upper end of our likely initial outlook range. Importantly, the growth we're realizing today and our expanding capacity serve to further reinforce the confidence we have in our long-term 13% to 16% growth objective. And with that, I'll now ask the operator to open up for questions.

The floor is now open for questions. We’ll go first to Lisa Gill with JPMorgan.

Good morning, and thanks for the comments. I wanted to start with GLP-1s and really understand from two sides. One, when we think about rates for 2024, can you talk about what you've incorporated in rates around GLP-1s, especially around weight loss as we have new products coming to the market? And how do I think about that from the PBM side when we think about the services that you can wrap around that and sell from a PBM perspective?

Lisa, thanks so much for the question. In a second, I'll ask Brian Thompson from UHC and Dr. Patrick Conway to respond to your comments in a little more detail. But let me just preface all of that. You know, the thing we're most overall focused on in GLP-1 space is honestly the pricing. You know, we're very positive about the potential for another tool in the toolbox to help folks manage their weight. We recognize that has potential benefits, but we're struggling and frankly our clients are struggling with the list prices, which have been demanded of these products in the U.S., which are running at about 10 times the level of price which have been paid in Western Europe. So, overall, I'd say that is our focus, is to try and find a way to make this a sustainable and affordable space for our clients to support. With that said, let me ask Brian to give you a perspective from UHC and how they've incorporated this in their forward view?

Sure. Thanks for the question there, Lisa. First, to put in context GLP-1 is over 80% on the diabetic side. So as we think about weight loss, up to maybe 20% of our total spend and it's largely performing in line with what we had planned as we went into ‘23. And we feel very confident and comfortable about how we're looking at that going forward into ‘24. As you think about it, keep in mind, the vast majority of the coverage here is in our fee-based business, that's our self-employed customers and that's still at less than a third, around 30% of our book. As we look forward, are our customers considering to cover more or less? I would say it's a mixed bag, some are seeking coverage albeit dissatisfied with the price points. Some are backing off given the cost, but I wouldn't really be directional one way or the other on whether or not we're seeing more or less coverage on the weight loss side as we look forward. But again, to Andrew's point, beyond just getting to the obvious lower price points, we're really trying to work with manufacturers to get to some aligned value-based constructs, getting pricing to a point where it's based on outcomes and adherence levels, all the way to outright risk on utilization levels, and pairing those with therapies and programs that can put less reliance on lifelong adherence requirements like these drugs currently have. We're not there yet. We're optimistic, but we can get there, but clearly price point is a key barrier.

Brian, thank you very much. Patrick, could you discuss the broader strategies we adopt from the OptumRx perspective?

Thank you. As Andrew said, our customers, payers, employers, people we serve are concerned about the prices of GLP-1s as set by manufacturers. OptumRx will continue to negotiate lower prices through discounts over time, be transparent with our customers, and implement clinical evidence-based guidelines so the right people get appropriate medicines. And as you alluded to, Lisa, obesity and cardiometabolic disease is a major public health issue in the U.S. and across all of the countries we serve, we are developing and implementing comprehensive solutions of which medicines are only a part on behalf of our clients and people we serve to drive better health outcomes for all and value to the health system.

Thanks, Patrick. And Lisa, thanks so much for the question. Next question, please, Jennifer.

Yes, we'll go next to A.J. Rice with UBS.

Hi, everybody. Thanks for the question. You know, it's similar to last quarter, the trend in margin and OptumHealth and OptumInsight has been down year-to-year, you know, you've called out change, particularly with OptumInsight, but I wondered if there's any ability to discuss unusual items, non-recurring items. I know you said you had some cost reduction programs you were implementing this quarter in OptumHealth. Did those impact the results? And is there any change as you look ahead to ‘24 in your margin expectations or targets for those two businesses?

A.J., thanks so much for the question, appreciate it. So let me just make a few comments, particularly as it speaks to the OptumHealth part of the question that you raised. So as you look at 2023, essentially what we've seen, and we refer to this in Q2, greater growth in the number of people, patients, that we've been privileged to serve this year, particularly the more complex patients. So very strong, and you heard in our opening commentary, very strong growth in the number of fully accountable lives running at about 900,000, substantial fraction of that coming in the more complex cases. As I said back in the last call, we're very, very pleased to have that growth. We believe that is really foundational or key foundation for future long-term growth of the business. However, within that, the mix of that population is a little different to what we expected. That takes time to then build the engagement capabilities that we need to be able to work with those people and their care providers to ensure the very best care is delivered in the most efficient and effective way. And that's really the bulk of the investment that we're talking about. It's really taking the time, looking after those folks in the way they need to be looked after right now in advance of those being able to engage with them fully and deliver then the various interventions and advice that we can provide that we're really building throughout Optum to ensure that not just in one year, but over multiple years, those folks get increasingly better care delivery and better outcomes. And recall that these patients in many cases have really been somewhat, you know, not necessarily looked after, as well as they could have been by the system, because of their very complexity. In some cases, they're not able to get to clinics, which is why we've been building up our home care capabilities and other wraparound services to the classic clinic approach. That's really the driving force. Now, as that speaks to the future, two things really, A.J., one is we're super confident around our ability to continue to grow the number of patients, who we are able to look after. Number two, as those capabilities that have been accelerated during this year begin to affect both the quality positively and the cost of how these patients' care is delivered, you're going to see that shine through an improved economic performance of OptumHealth. And as we look forward, we're very confident about continued strengthening of that business. Make no mistake, OptumHealth is having a very strong growth year and we're taking the opportunity this year to really ready ourselves and build strength for the next many years of that business. AJ, thanks so much for the question. Next question?

Yes, we'll go next to Josh Raskin with Nephron Research.

Hi, thanks. Good morning. Understanding that you expect Medicare Advantage to grow at a healthy pace, I think you said above market again in 2024. Could you speak to that progress expected at OptumHealth? I know we'll get details at the Investor Day, but how are you thinking about the transition of patients from sort of fee for service to these fully risk engagements and then maybe general levels of investment for growth in light of the risk model and reimbursement model changes?

So Josh, thanks so much for the question. I mean, obviously we'll leave very much the detail of the elements of the growth model for when we meet with you all in November. Having said that, we would no reason not to expect a continued healthy momentum in our move toward value-based care next year with continued high expectations for our ability to deliver that. To your broader question, maybe just reflect a little bit again on 2023. So this has been a year which essentially has been obviously very heavily influenced by the change in the funding environment that was announced earlier in the year for Medicare Advantage. And we're very appreciative of the three-year phasing of the changes, which CMS ultimately decided to make. But obviously, those changes are essentially the equivalent to a price cut phased in over three years for the Medicare Advantage program. We are appreciative of the fact that we have had essentially seven, eight, or nine months warning of that in terms of when that was announced before we go into the ‘24 year. And that’s allowed us and we have taken full advantage of it to really focus on how we ready ourselves, not just for 2024, but for the next 36 months. So 2023 has been all for us about ensuring that we reengineer our cost base, that we refocused our benefit strategies to those things that matter most to patients, that we strengthen and invest in our ability to manage affordability of care going forward into the system, and that we're taking full advantage of building the capabilities we have already begun to construct around our consumer engagement, our technology, digital first capabilities, and ultimately doubling down on our commitment to value-based care. That has really been the story behind the investments of 2023 in response to the changes that have been signaled by CMS, so that we go into ‘24, ‘25, ‘26, ‘27 feeling strong, feeling that we've taken advantage of these last several months to ensure that we've adjusted and adapted our strategy and business in readiness for the change in the funding environment, which gives us strong confidence for next year and underpins our commitment to the signal I just gave you in terms of our potential for 2024. Next question, please?

We’ll go next to Justin Lake with Wolf Research.

Thanks. Good morning. I wanted to inquire about UHC's performance. Firstly, your medical loss ratio was better than we anticipated, but I'm interested in how it aligns with your internal estimates. Could you also share how this performance might have varied across your three primary business segments? Additionally, regarding the UHC margins in the third quarter, I found it noteworthy that while the medical loss ratio declined by 50 basis points year-over-year, overall UHC margins actually improved by 50 basis points. What factors might have contributed to that growth? Thank you.

Justin, thanks so much for the question. Let me ask John Rex to respond to the first part and then Brian Thompson, the second.

Good morning, Justin. Overall, I would say the results for the third quarter were generally in line with our expectations. I want to highlight a few points. As we discussed, care patterns remained focused on outpatient activities, particularly concerning seniors, which continued at the levels we observed during the second quarter. This was a significant driver of activity throughout the quarter. We observed typical seasonal trends, with a noticeable drop in care activity in the third quarter due to factors such as vacations, discretionary care, and seasonal illnesses. Historically, prior to 2020, the third quarter was usually the quarter with the lowest care ratio. Therefore, this trend appears to be more typical as we return to more normalized activity levels. We still anticipate our full-year medical care ratio to align with the upper end of our initial guidance range of 82.6, plus or minus 50 basis points, indicating consistency with our previous projections. Regarding third-quarter seasonal factors, we expect some influences as we approach the fourth quarter, the final quarter of the calendar year. Utilization and Part-D impacts usually trend upward in the fourth quarter, supported by deductible wear-off features and the onset of influenza and RSV. Hence, we anticipate a reversal of trends as we head into the fourth quarter.

Great. Thanks, John. And Brian?

Yes, John, I think you did a good job of explaining, sort of, the sequencing of the medical cost ratio. What I don't want to lose sight of is I think the key point is all of our businesses in UnitedHealthcare right now are really demonstrating innovation and market success at the same time. And you're seeing that come through in these margins, whether that's our complex care and health equity strategy in Medicaid, how we're showing up with broader service offerings and conveniences like UCard and URide, NMA to complement strong, stable core benefits or some of the innovations you heard around the commercial benefits in Dirk’s opening remarks. This is really translating the type of growth and performance that I think you've come to expect from UnitedHealthCare, and I think it sets up a really nice baseline that I remain optimistic about as we look forward to 2024.

Thanks so much, Brian and John. Next question, please?

We'll go next to Stephen Baxter with Wells Fargo.

Yes, hi, thanks. I wanted to ask about the PBM business, obviously interest in alternative or maybe even experimental models has been a big area to-date, you know, the past quarter or so. I guess what are you hearing from your health plan employer clients on their degree of interest in doing something totally transformational in terms of how they manage those benefits? Thanks.

Hi, Stephen, thanks so much. Let me ask Patrick Conway to respond to that.

Yes, so as we interact with our clients, employers, payers, and others, on this, first I'll note, a recent survey came out, approximately 90% of those clients are satisfied with their PBM. They're also satisfied with the level of transparency. Specifically for OptumRx, we will continue to innovate and provide additional solutions to our clients that are comprehensive, integrated and transparent. I'll call out one other area, transparency to the consumer. This has been a journey for us that we continue to drive transparency to the consumer. To call out one example with Price Edge, a product recently launched, that's providing consumers the most affordable medicine at the point of care. We are seeing millions of consumers access, use this tool as we provide it to them. And so you'll continue to see us to drive consumer transparency and innovative solutions to our clients.

Right, Patrick, thanks so much. Next question?

We'll go next to Nathan Rich with Goldman Sachs.

Great, good morning. Thanks for the question. I wanted to go back to the GLP-1 Class and I guess, you know, as we're starting to see more outcomes data for these drugs, do you see that changing, you know, employers willingness to cover this class given the potential long-term benefits and, you know, how you helping them think about potential ways to design the benefit to be able to manage that cost, which you guys talked about earlier being so much in focus for employers?

Yes, Nathan, thank you for the question. There's a saying that I appreciate in this situation: innovation that isn't affordable isn't truly innovative. This is crucial to our discussion. While I see great potential in the future of this drug class, we acknowledge the need for affordability. Our clients are having a tough time understanding how to take on what they perceive as an indefinite financial risk. This is why Brian mentioned earlier that we are proposing various options to manufacturers, but we need them to take action. We are very open to any models that might work. We are collaborating with our clients to help them understand the different possibilities, but they're sending us strong signals that they require assistance in making this more affordable for their employees and members. We will continue to focus on this. Thanks for your question, Nathan. What’s the next question?

We’ll go next to Scott Fidel with Stephens.

Hi, thanks. Good morning. If you can give us your updated thoughts on from this vantage point, what you're thinking about the trajectory of just overall wage inflation in healthcare? And how you're sort of planning for that? We have been seeing sort of moderation from the COVID peaks, but there certainly seems to be some pro-inflationary risks out there when thinking about some of the federal policy proposals, state proposals, and then obviously some of these union actions too. So just curious on how you're thinking about wage inflation and health care moving forward and risks to that inflecting back upwards? Thanks.

Yes, absolutely. Thanks so much for the question. Let me ask Dirk to give you a few comments on that.

Yes, well, to start, what I would say is as we go out and we negotiate with various health systems for prices as we move forward, you know, one of the key things involved in those discussions is, you know, what wage inflation is and how it's impacting their costs. You know, as we sit here today, it's lucky that we sort of have three-year contracts, so it's muted a little bit. But what I would also say is, you know, we see a little bit of upward pressure on unit costs related to wages, but as I sit here today, it's not something that we haven't planning for and priced about. As I think about our own business, we haven't had trouble recruiting people such as nurses, clinicians. We've actually, you know, people really want to work for us and from a capacity perspective, one of the things as we've talked about our growth so far, we have to make sure we have the appropriate labor capacity to manage all the risks that we take. And as a consequence, we do spend a lot of time looking at the market. And as I said, people want to come to work for us. They like the mission. They like the ability to transform healthcare. And we're pretty pleased with our ability to hire and manage our operations going forward.

Thanks, Dirk. Thank you very much for the question. Next question please?

We'll go next to Kevin Fischbeck with Bank of America.

Great, thanks. I wanted to ask about OptumHealth, I understand the commentary about membership coming in better, which creates a margin drag, but it feels like a couple of hundred thousand people, maybe low to mid-single-digit, more membership than you expected, causing margins to drop from 8% to 7% or 12%, essentially. Seems like a pretty big delta. So I assume there's other things going on in there beyond just digesting new membership growth. If not, then I guess we would know what the margin is on those new members. But is there anything else you would spike out there and how do we think about building back from where we are today to that 8% to 10% margin target? Is it simply about getting today's membership to target margins or is there a cost side? It seems like you're adjusting the labor force to some degree. Is there an MLR side? Is there a rate side? Any other color to kind of help us give visibility into the 8% to 10% over time? Thanks.

Kevin, thank you for your question. The key factors we've discussed before remain the most important. To reiterate what we mentioned back in Q2, we've seen an increase in Medical Loss Ratio that has stabilized; it hasn't decreased or accelerated but is a noticeable trend year-over-year. Additionally, there has been a rise in behavioral care costs, particularly within OptumHealth where our behavioral business operates, and that has also increased significantly year-over-year. We view this positively as it indicates that more people are seeking help for their behavioral issues, which is closely linked to their ongoing medical expenses. However, it's still an area of concern. There's also growth in our value-based lives and the complexity of these lives, which includes geographic diversity. As I mentioned earlier, building the capabilities to effectively engage with these populations takes some time. We have invested heavily in these capabilities in preparation for what we hope will be many years of supporting these individuals at a higher level. I previously noted that we are re-engineering our cost base, which involves changes across the organization, including OptumHealth, in response to shifting pricing signals from CMS. However, I consider those adjustments secondary to the primary factors I've just discussed. We have a clear understanding of the populations we serve, which informs our outlook for 2024, 2025, and 2026. We are confident in our ability to grow as an organization while also restoring margins to the levels you have historically expected. Thank you again, Kevin, and I welcome the next question.

We’ll go next to Sarah James with Cantor Fitzgerald.

Thank you. I wanted to circle back to your comments on the strength in commercial growth and national accounts for next year. Can you give us a little bit of color on the pricing environment, given all the comments you've made on the moving pieces and cost trends, and then help us put into context that, and the broader economy with how your clients are thinking about product selection, either in breadth or the type of products that they're purchasing from you in ’24?

Sarah, thanks so much for the question. Let me ask Dan Kueter, who looks after our commercial insurance business to answer that.

Yes, thanks, Andrew. Hi, Sarah. Thanks for the question. The growth that John mentioned in his comments is settled business in our national accounts fee-based segment. So we're very happy with how that's completed. We're pricing and negotiating our fully insured business for January right now, and we're comfortable with how that's materializing as well. Employers continue to focus on both affordability and innovation, and our innovative products continue to resonate significantly in the market, as Dirk highlighted in his comments. Thanks, Sarah.

Thanks so much, Dan. Next question, please?

We’ll, the next two David Windley with Jefferies.

Hi, good morning. Thanks for taking my question. I wanted to pivot to OptumInsight, you had commented in previous calls about a fairly heavy level of spending to integrate change and invest in that platform. I wondered if you could update us on any ongoing spend in that regard? What we should expect in terms of implementation on pro-health and kind of trajectory of margin in OptumInsight? Thank you.

Hey, David, thanks so much for the question. Let me ask Roger Connor, who's our new CEO of OptumInsight to respond, Roger?

Thank you, and David, thank you for the question. First of all, just to say I'm delighted to be taking over the leadership of Insight. This is a pretty unique and special business. And getting to know the people, the products, and the offerings, I think we're going to make a real difference to healthcare. So excited about that future. Just specifically, David, on your question, the change integration’s gone really well, to be honest. You'll see in the Q3 margin that we had the tail end of some of that spend to integrate, but the Q3 margin is in line with our expectations. I think it is worth understanding the longer term outlook for OptumInsight margin. We still believe that's in the region of 18% to 22%, that's really driven by the mix of the businesses. As you know, we're a business that has software, we have services, so there are different margins in there. But when you take what we've created with change and you look at the overall portfolio that we have, we have this incredible portfolio that is addressing everything from clinical decision support, we've got products for admin efficiency, we've got other products for payment optimization. You have that growth engine plus our innovation, plus that margin profile, we're very confident about the future performance of Insight.

That's great. And I wonder whether Dan Schumacher, who's been very heavily involved in our various health systems partnerships, might just want to reflect a little bit on the question obviously was around pro-health, but rather than talking specifically, maybe just share a few thoughts about the overall evolution of those health system profiles and how they play out over the first couple of years.

Sure, thanks Andrew. David, appreciate the question. Certainly our health system partnerships, you mentioned one that we've announced recently, it's a growing portfolio for us. Obviously, at the health system level, there's a lot of pressures. We've talked in earlier questions about wage inflation and so forth. And we have a unique opportunity to really be able to address some of those near-term challenges, while at the same time provide some capacity for future evolution of the system as they think about more digital capacities, greater outpatient catchment, as well as further engagement. So those are some of the things that we can help unlock for them and their migration to value-based care. So we're encouraged by the portfolio. It continues to grow. Actually, from the initial scope nine out of 10 have expanded from their initial scope. So continuing to grow, we're in the early days, and we see a lot of opportunity ahead of us.

Dan, appreciate it and thanks so much for the question. Next question, please.

We'll go next to Ann Hynes with Mizuho Securities.

Hi, good morning. I would like to ask a GLP question more on the medical side. It sounds like right now price appears to be the greatest barrier for widespread adoption, assuming the outcome data continues to be positive. If pricing gets to a point that you view and your clients view as affordable. What do you think would be the long-term impact on care on the medical side? Are you seeing any near-term effects right now on MLR? I should say an MLR benefit. And do you think it would be reasonable to assume overall MLRs should decline with greater adoption of these drugs? And maybe what categories of health spend do you think or do you view would be the biggest opportunity going forward? Thanks.

Ann, thanks so much for the question. I mean, I think honestly it’s just way too early for us to be able to see anything like that, just in terms of, you know, obviously the weight loss indications are only just really coming into play. We haven't really been able to see, I'd say, anything from that perspective yet. And as I said earlier, the real focus for us right now is to try and figure out a way in which we can get to a position where the affordability of this class puts it in a zone where, you know, the people who need it can get it and can afford it. Nothing more to say on that, honestly. Next question, please?

We’ll go next to John Ransom with Raymond James.

Hey, good morning. On your fully accountable lives, what's the expectation where you'll end up in the year with a number of medicare fully advantage lives? And just looking at the eliminations, is it fair to assume that a lot of those fully accountable lives are coming out of the UHC book? Thanks.

So thanks very much for the question. I'll ask Dr. Amar Desai, who leads our OptumHealth Organization, just to comment a little bit on the kind of shape of the folks we look after there, and the degree to which they come from both UHC and obviously many of our external partners, Amar?

John, thanks very much for the question. We've had great growth in fully accountable membership as we mentioned earlier, adding over 900,000 patients for the year. That growth is diverse across a number of payers. We have over 100 payer partners spanning both national and regional payers. And as we think about that growth, of course, UnitedHealthcare is a core partner to us, but we continue to have the strength of our medical groups and physician networks being incredibly attractive to other payers regionally and nationally to be able to grow in their own value-based arrangements to drive outcomes and total cost of care. So we look forward to continued growth in a broad-based, diverse way. Thank you very much.

Amar, thank you. And thank you for the question. Jennifer, I’d say the last question now please.

Okay, we'll go last to Lance Wilkes with Bernstein.

Thanks for the question. Regarding Medicaid and Medicaid Redetermination, could you provide some insights on the margin implications for members who are being redetermined off? We have already noted instances of double coverage or zero Medicaid Outpatient Revenue. Additionally, do the trends in enrollment and disenrollment align with your expectations, and what can you observe about where those members are moving—individual coverage, employer plans, or remaining uninsured? Thank you.

Hey, Lance. Thanks so much for the question. I'm going to ask Tim Spilker, who leads our Community and State business to respond to that, Tim?

Yes. Thank you, Lance, for the question. And maybe I'll start with just the enrollment trends, because I think that really informs a whole number of factors. So first off, what we're seeing, I think, consistent with what states have reported is significant disenrollment for procedural reasons. And what's more, a lot of variability, frankly, across states in terms of the pacing and re-enrollment and even states now that are suspending terminations or re-enrolling members based on guidance. So those stops and starts certainly have an impact, you know, on our membership, as well as membership mix. But frankly, that's why we continue to develop even more ways to engage members and support our states. You know, our goal really is to help individuals find coverage and so a couple points on that. Our reach rate for the programs that we've implemented exceeds that of our traditional programs, and we're seeing strong re-enrollment rates between 15% and 20% depending on the state. And so as a result, as John mentioned in his comments, we're retaining a significant majority of the members we engage with, certainly more to do. And second, in terms of your question around just kind of outlook, again, I think the factors around the re-enrollment has an impact on just how we think about mix. But I think it's also important that to consider the rate environment. You know, states are taking into account a thoughtful, taking a thoughtful and data-driven approach to rate setting. And with visibility now into around 45% of our revenue for ‘24, really appreciative of the approach that states are taking. So all in all, I would say both membership, as well as our outlook is in line with what we expected at this point with a lot of variability. I think our membership looks good in terms of the outlook that we set at the beginning of the year. And at this point, I feel all of this is manageable.

Tim, thanks so much. And thank all of you for your time this morning. I hope what you heard during today's call only reinforces what you've come to expect from UnitedHealth Group, an organization that's just as nimble and agile as it is focused and disciplined, always growing, always innovating, ceaselessly committed to our mission and deeply devoted to those we share. Thank you for your attention today and we appreciate it.

This does concludes today's conference. We thank you for your participation.