Good morning, and welcome to the UnitedHealth Group First Quarter 2025 Earnings Conference Call. A question-and-answer session will follow UnitedHealth Group's prepared remarks. As a reminder, this call is being recorded. Here are 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 Earnings 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 April 17, 2025, 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, everyone. Thank you for joining us today. UnitedHealth Group started 2025 in two seemingly disparate ways. One, continued strong growth across our businesses. Our people are providing more health benefits and services to more members and patients as the market responds to our distinct offerings. The other way, however, was an overall performance that was frankly unusual and unacceptable. As you saw in our release, we're revising our adjusted earnings per share outlook for the year to $26 to $26.50. This morning, we'll detail for you the factors driving our revised outlook and how we plan to address them. I'll start with performance, which was impacted by two broad factors in our Medicare businesses: care activity and member profiles. It's important to recognize UnitedHealthcare and Optum are distinct businesses with different models, markets, and products. In addition, Optum's Medicare business is multi-payer and not limited to just UnitedHealthcare members. Given these differences, changes in care activity and member profiles do not always follow the same patterns and can result in different impacts to each business. The respective teams are urgently responding to our performance challenges. Starting with care activity. In UnitedHealthcare's Medicare Advantage business, we had planned for 2025 care activity to increase at a rate consistent with the utilization trend we saw in 2024. Instead though, first quarter 2025 indications suggest care activity increased at twice that rate. Increases in physician and outpatient services were most notable and inpatient to a lesser extent. This increase in care activity was limited to our MA business and was not a factor in our commercial or Medicaid businesses. Care activity trends in those areas were as expected. Turning to member profile. Unanticipated changes in our Optum Medicare membership are impacting 2025 revenue. We added more new Medicare patients to Optum Health, a portion of whom were covered by plans that were exiting markets. They experienced a surprising lack of engagement last year, which led to 2025 reimbursement levels well below what we would expect and likely not reflective of their actual health status. Additionally, many of the current and new complex patients we serve are more affected by the CMS risk model changes that we are in the process of implementing. To be sure, it is complicated, but we're not executing on the model transition as well as we should. We must and will work to better anticipate and address these factors. Here still early in 2025, we believe they are highly addressable as we look ahead to 2026. Let me now talk specifically about what we're doing. First, we're ensuring the complex patients most impacted by the previous administration's Medicare funding cuts engage in clinical and value-based programs. Second, we're consistently engaging with members in their homes and in post-discharge settings. Engagement remains the key. Third, we are appropriately assessing and updating the health status of new patients, especially those at high-risk levels. Fourth, to more effectively transition to the new CMS risk model, we're investing significantly in improving physician clinical workflow to help ensure better care and timely insights on when and where care is most efficient and effective. Finally, our Medicare Advantage plan designs and pricing for 2026 will be fully informed by these trends. While we are decidedly unsatisfied with these results, our growth and foundation for improvement remain solid. UnitedHealthcare's Medicare Advantage business is on pace to serve an additional 800,000 people this year. Optum Health is on track to add 650,000 net new patients to value-based care arrangements. In Medicaid, we are growing and continue to see positive momentum in closing the gap between people's health status and state rates, and we are very appreciative of our state customers for the ongoing productive discussions. Within Optum, so far this year, Optum Rx is off to a strong selling season, characterized by new wins as well as high retention of long-term customers. The growth of Optum Rx underscores the vital role that PBMs play in helping to reduce the price of drugs for consumers and the value that sophisticated purchases of healthcare, the employers, unions, and governments see in our efforts to counter the high prices set by drug manufacturers. And to ensure that people have convenient access to high-quality affordable drugs. That's more important than ever as drug manufacturers continue to increase what they charge Americans, in some cases, ten times what they charge people in Europe. The growth at UnitedHealthcare and Optum reflects the efforts of our 400,000 colleagues who come to work every day, thinking differently about what is possible, advancing new products and ideas while constantly refining existing programs, working to make things better for the people we are privileged to serve. Our team continues to innovate to make accessing care easier. For example, our newest tools have sparked a more than 40% increase in digital engagement among our senior members through the first quarter. We see evidence of this in sharply higher and earlier wellness visits to their primary care physicians, with total visits in the first quarter running far above the year-ago period. This will help members better manage their health and promote early detection of emerging issues. Further, Medicare Advantage also costs taxpayers less and delivers more to seniors than fee-for-service Medicare, especially in value-based care arrangements. An essential approach to achieving both health outcomes and lowered costs is ensuring people get the care they need when and where they need it. And a good place to understand those needs better is in a seniors' home. Our HouseCalls program does just that. HouseCalls, which is only available in Medicare Advantage, provides a thorough in-home clinical visit at no cost to seniors. Following CMS' best practices for such care, our clinicians review a patient's medical history and current medications, conduct comprehensive physical exams, provide lab tests and screenings, and coordinate necessary follow-on care. HouseCalls clinicians closed millions of care gaps last year, helping people stay out of the hospital and the emergency department and referring those in need to appropriate social services to help them live healthier at home. This is Medicare Advantage innovation and value in action, helping drive proactive preventive engagement with the health system rather than more expensive reactive acute care. These benefits and innovations and their value to seniors and taxpayers will be placed at unnecessary risk by funding cuts in recent years to the Medicare Advantage program. While we continue to navigate those funding cuts to seniors' benefits, it is significant that the recently released 2026 rate notice begins to reflect the accelerating care cost trends we've experienced for some time. This will provide much-needed relief to seniors and reflects policymakers' understanding of the importance and the popularity of Medicare Advantage. Our work to deliver a better experience for people and lower costs spans our enterprise as it always has. Just within the last few weeks, we've introduced several initiatives that will help people in their healthcare journeys. Optum Rx will remove prior authorizations on 80 drugs accounting for more than 10% of our pharmaceutical prior authorizations. And Optum Rx has aligned payment models to pharmacies more closely to their cost for drugs. This helps pharmacies manage the ever-increasing prices charged by drug manufacturers, enabling pharmacies to stock more medicines and ensuring more consistent pricing and access to medicine for consumers. 26 million consumer calls were more accurately directed to the right advocate by an AI agent, improving the consumer experience and reducing wait times. We expect AI will direct over half of our calls to the best resource during 2025. All of these efforts are making things simpler and easier for consumers and providers, a goal we share with all healthcare stakeholders. Yet, we all have to contend with the stubborn fact that healthcare costs more in the U.S. than it should, even beyond the widely recognized disparities in drug prices. Common procedures such as heart bypass surgery, spinal fusions, and heart stents are four times as expensive in the U.S. as they are in Germany, Australia, and the UK. Total hip replacements are twice as much. It's simply not sustainable. As we have made clear, we are as committed as ever to continuing down the path of transparency and affordability, ensuring that Americans get the health system they deserve. With that, I'll turn it over to John, who will discuss first-quarter performance and full-year outlook in more detail.

Thank you, Andrew. I'll start by walking through several updates to our ‘25 outlook and then elaborate on the reasons for them. As Andrew said, we now expect adjusted earnings of $26 to $26.50 per share. It's an outlook that I'm extremely disappointed to share with you. This reflects the profile of patients served at Optum Health. It also reflects significantly increased care activity across the UnitedHealthcare Medicare Advantage plans. Within that outlook, we expect about 50% to come in the first half of the year. We're affirming the consolidated revenue outlook of $450 billion to $455 billion we shared with you in December. Within this, we expect revenues for both UnitedHealthcare and Optum Rx to be better than our initial view, offsetting a reduced outlook at Optum Health. The full-year medical care ratio is now expected to be 87.5% plus or minus 50 basis points, reflecting higher utilization across senior populations and the patient mix and revenue profile of Optum Health. Within this range, we expect the first half of the year to be below the midpoint and the second half to be above. At Optum Health, our revenue outlook is $106 billion to $107 billion and operating earnings are $6.2 billion to $6.4 billion based on the factors discussed and which I'll get into more deeply in a moment. Over half of the $10 billion revenue change is the result of transitioning some legacy risk-based arrangements to fee-based and is neutral to earnings. We expect about half of Optum Health's operating earnings to be in the first half. At UnitedHealthcare, the operating earnings outlook is updated to $16 billion to $16.5 billion and reflects the higher care activity we're seeing. Within UnitedHealthcare, pressure was largely contained within the senior business where we saw a sharp increase in care activities that became apparent as we closed out the quarter. As noted, this was most significant for both physician and outpatient care and to a lesser extent inpatient care. In years past, this is an insight we may not have picked up until the second quarter, so it is useful to have the information with ample time to incorporate into our 2026 planning. In the quarter, we experienced percentage increases in care activity about double last year's level. Unit prices behaved as expected. Let me start with the obvious fact that it is early in the year and we don't know everything that might be driving our experience or how long the increase in care activity might last. But care activity was broad-based across our senior individual and group populations. One example is in group MA, member retention was about 98% and as a result serves well as a same member metric. Here we observed significant increases in elective care activity in the first quarter. Of note in this population, we believe the behavior may have been impacted by the meaningfully higher member premiums, which were driven by the Medicare funding cuts. Another example across senior populations was the earlier and higher wellness visit activity we saw, which of course drives specialty and outpatient utilization. Some of this may be a seasonal shift in consumption patterns as wellness visits happen once a year. Turning to Optum Health, as it relates to the patient profile, we experienced a couple of key elements here. First, growth in certain markets where there were meaningful plan exits. These new patients had not been engaged by their prior plans for most of last year and we're seeing revenues associated with the patient profiles meaningfully below expected and normal levels. This is very addressable. Second, the ongoing execution to the new CMS risk model, while complicated given the multi-year phase in, has not been to our operational standards. Transitioning to a new model and concurrently running two distinct versions has been more operationally complex than anticipated. But no question, we need to execute better and we will. Across the enterprise, we continue to focus on operating costs to help mitigate external pressures while ensuring our workforce aligns to the areas of greatest opportunities and customer needs. Looking ahead, we see a long runway for further technology advances that will translate to more sustained operating efficiency, which in turn drives opportunity for further innovation and advancements in the company and across the industry. Before we get to Q&A, I want to provide a few business highlights. At UnitedHealthcare, we still expect to serve up to 800,000 more people in Medicare Advantage this year across our individual group and dual special needs offerings. This underscores our long-standing commitment to stability and differentiated value. Our growth demonstrates UHC's deep relationship with our members. People served by our community and state business increased to $7.6 million. We continue to have growth momentum with recent service expansions in Kentucky, New York, and Florida. We're also encouraged by the updated Medicaid rates so far in 2025 that more closely align with underlying member acuity, but funding remains insufficient to meet the health needs of patients. Commercial self-funded membership increased by approximately $700,000 in the first quarter, a result of our continued strong product innovation. Commercial insured membership was impacted by the individual exchange products. Our disciplined pricing approach remains consistent and as a result, we experienced some member attrition. Overall in our commercial book, we are encouraged by the early 2026 selling season indications, which are showing strong retention rates. Turning to Optum. At Optum Health, we continue to expect to add 650,000 new value-based care patients this year. We're working to engage with these new members ever more rapidly. By the end of 2025, we expect to have about 5.4 million value-based care patients. At Optum Insight, we have a pipeline of new products coming to market this year with exceptional customer interest. For example, in the first quarter, we launched AI-powered claims efficiency tools that increase productivity by over 20% for our revenue cycle management customers. Lastly, Optum Rx revenues grew 14%, exceeding $35 billion for the quarter. Both customer retention and new customer wins contributed to script growth of 3%. As Andrew noted, performance in the quarter was below the standards we expect. But with disciplined and urgent execution and attention to detail, we expect a return to form in the quarters ahead.

Thanks, John. Even with the growth that our people generated this quarter, this was far from the performance we expect of ourselves. We're acutely aware it's a privilege to be a part of an organization with the capabilities to make a meaningful contribution to modernizing and simplifying the health system. And we're committed to improving our performance in the rest of 2025 and into 2026. And in doing so, delivering consistent positive results for you and returning to our long-term earnings per share growth target of 13% to 16%. With that, we can now turn to your questions.

We'll take our first question from Justin Lake with Wolfe Research.

Thanks. Good morning. My question is about the cost trend for Medicare Advantage. You mentioned that you entered the year with expectations for a trend similar to 2024. Could you provide the specific estimate for that trend? What did you anticipate for this year, and how does that compare to your current expectations? Additionally, could you let us know what you observed in the first quarter? For example, by how much did you miss your medical loss ratio estimate, and what are your expectations for the acceleration or differences in the last three quarters compared to the first quarter?

Yeah. Justin, thanks so much for the question. I'll ask Tim Noel to respond just in a second in detail to your question. I mean, obviously, it's still very early in the year, but we have clearly seen a pickup in trend in a specific part of the UHC business again, the senior business. Tim will talk a little more about that to you in a second. It's still early; still, even our first quarter is only partially complete, but unusually we've seen this pickup which is what's obviously influencing our position here. So let me ask Tim to give you a little bit more detail on that.

Good morning, Justin. Thanks for the question. Yes, I'll attempt to break it down for you here. So as was mentioned in the opening remarks, in 2025, we anticipated care levels consistent with what we observed in 2024, which felt appropriate as we stepped into the year. And what we were assuming, think of this as units consumed, we're assuming that in 2025, we'd see a similar increase by that metric as we observe in 2024. And if you break that down in the Medicare book, you can think that in total in terms of total trend drivers, about one-third of that is related to increase in care activity or units consumed. And what we are seeing and again that's focused on physician and outpatient, but driving an overall 2x increase in that level of units consumed in Q1 of 2025. And again, that metric is about one-third of the total trend drivers in the Medicare book. We see that inside of the first quarter of this year, but we are making the assumption right now that that trend will persist throughout 2025 and also making the same assumption that it will persist into 2026 and that will shape our overall pricing assumptions. Now some of the drivers that John mentioned behind what we're seeing, you might presume that some of those would result in a change in our seasonal consumption patterns. But at this distance, we feel like we need to make the assumption that that activity will persist throughout the year and into 2026.

And we'll take our next question from Josh Raskin with Nephron Research.

Hi, thanks. Good morning. Can you help us connect the higher incidence of primary care visits and the Optum Health pressure? I assume you don't have that primary care issue in Optum Health, which should also mitigate the downstream impact. So why are you expecting the higher follow-through if you control primary care? And then based on the fact that you're seeing worse performance in Optum Health or value-based care, could you remind us why you think you can control cost better in that environment and it's probably a good time to get the refresher on why the strategy to allocate a lot more capital to VBC in the ecosystem is totally best in the long term?

Yeah, Josh, thanks so much for the question. So I'm going to ask Tim just to address the first part of your question, then Amar to talk a little Dr. Desai to talk a little bit around the Optum Health experience during the quarter and the differences of what we're seeing there and the like. And as I said in my commentary at the beginning, the businesses do operate very different models and it's not completely surprising to see somewhat different experiences. And then I'm going to ask Heather to just do, as you kindly requested, a kind of refresher on the value-based care position. So we'll do that also for you. So bear with us. This sounds probably going to take a little few minutes. But Tim, if I could ask you to start and then we'll pass over to Dr. Amar Desai.

Yeah. Thanks, Josh, for the question. So yeah, let me just dive in a little bit with a little bit more detail into some of what we're seeing that's driving the increase in care activity. Now let me start with our fee-for-service, so kind of our non-capitated community MA members. We have seen an increase in physician outpatient care activity in that population. And one of the dynamics that we're seeing is they are generally seeking more preventative care, which is a good thing, and that also includes more in-home visits, more in-home clinical assessments. And that in and of itself really not the trend driver, but it's the follow-on care that is more than what we have anticipated and that constitutes specialist visits, physician specialist visits as well as some other outpatient services. A dynamic at play in our group Medicare Advantage business is we are seeing a significant and disproportionate increase in utilization, largely within our public sector group retiree business. And this is a population that experienced the greatest year-over-year premium increases. And while we've seen a similar dynamic play out historically in our individual Medicare Advantage business when premium increases have been in play, we've really never seen this dynamic before in the group MA business. I mean, we're seeing it because of the pressures related to the Medicare funding cuts that are really driving up premiums in the group retiree business like they really never have before and kind of think groups with premiums going from $50 to $200. I mean, we did assume that we would see some care activity level increases in this population, but we're seeing far surpasses what we would have recently anticipated. And in that population as well, we are seeing more preventive care, more annual wellness visits, more in-home clinical assessments. But again, the driver there also being really the follow-on care that results from that.

Thanks for the question, Josh. So, the results for Optum Health, to be clear, were impacted by the profile of new value-based patients in Optum Health and the second year of the V28 phase. And we're taking actions to proactively address these issues. Our patient profile post AEP included many new to Medicare as well as new to Optum Health who are meaningfully less engaged by their prior health plans and providers. We believe that market-specific plan exits driven by V28 caused this dynamic and because of the strength and stability of our provider network, those patients chose Optum Health. Member profile challenges were not specific to any single Medicare Advantage carrier and occurred in multi-payer geographies like Texas and Washington. Additionally, we underestimated the impact of V28 in particular as it relates to the higher acuity structure of our patient population, which is more impacted by the risk model change. Our planned actions around operating cost containment and medical expense management were not able to offset the cumulative impacts of V28 and the new member profiles. As it relates to care patterns for Optum Health, in general in Q1, we see as a busier time for our physicians as we are engaging our patients. We've already engaged over 50% of all members and 75% of our complex members. This year, it's particularly important given the member profile of new Medicare and new Optum Health patients. Also within Optum Health, we're seeing some elevation in outpatient behavioral utilizations. Again, we're taking incremental actions above and beyond what we've planned for any year to improve performance. First, enhancing access for employees to network PCPs, especially around new patients to diagnose, document, and treat conditions. We're expanding home-based revisits and wraparound services, particularly as it relates to post-discharge visits after inpatient care. And as Andrew alluded to, we've accelerated EMR unification, deploying smarter clinical workflows and point-of-care tools to better adapt to the V28-related changes. Thanks for the question.

Great, Amar. Thanks so much. And let me ask Heather to maybe just take an overview of the value-based care proposition and why we continue to believe so strongly in it.

Sure. As Andrew mentioned, we have two distinct business models to consider. In Optum Health's capitated experience, which focuses on senior populations, we operate in a unique setting that follows a year two risk model. Dr. Desai noted that we expect certain physician activities in the early part of the year, which is essential for our model as it helps identify diagnoses and treatment needs, allowing us to address care gaps. While this presents a different narrative for Optum Health, we must be aware of the elevated care activity over the past two years. Regarding the outcomes-based or value-based care model, this should offset some challenges for several reasons. Engagement plays a crucial role; early involvement from an aligned network can help identify and manage care gaps, promoting preventive healthcare and decreasing emergency and hospital visits. A distinctive feature of Optum Health's model is the wraparound and in-home services that assess our members' needs, facilitating post-discharge visits and acute condition management programs. These elements are vital for transitions of care, reducing overall costs and improving health outcomes for our patients, thereby enhancing their quality of life. Integrating behavioral health into our care delivery systems further differentiates our approach. While we will experience revenue impacts this year, our unique value-based care model has historically driven Optum Health's growth above the industry, and we expect this trend to continue. Our improved care delivery and patient experience have resulted in high retention rates among members who require intensive care, ensuring that our current efforts will contribute to growth by 2026. We believe there are still many seniors in various regions that we can serve, as our network capacity remains underutilized. Lastly, as we progress through the year, we will strategically pace our membership growth, paying particular attention to specific regions and ensuring we align new members with our primary care provider network and in-home services.

Thanks, Heather. And I think Josh, I really appreciate the question and thanks everybody for allowing us to respond to that sort of as fully as we can. I mean, just maybe add a couple of comments to that. To that last set of comments from Heather, when we look into and you've often heard us talk previously about cohorts of members who choose to join Optum Health value-based care. What we're seeing in those earlier cohorts going back to say 2023, for example, those folks who first came in and started to benefit from our value-based care approach. We're seeing on all, basically all metrics outperformance in terms of the way in which that cohort and cohorts before them have performed. So what we're seeing here is not really a challenge to the underlying principle of value-based care. What we're seeing is how to adjust to a very dramatic price-cutting regime that's been implemented over the last couple of years by the administration. And it's important to recognize that that was across the average of the industry; independent analysis would say that was about a 9% price cut across the industry. Now that's a significant downdraft in terms of pressure. And obviously that affects participants whether you're a payer or a provider in the marketplace. And you've seen that effect over the last first year. We're now well into the second year of all of this. And what we're seeing during the second year is some of the, let's call them, second-order derivative effects. So I'll give you just a couple of examples of that. You've heard one very explicitly and we've mentioned the other already on the call. So a second-order effect would be, for example, as this pricing pressure has continued to press down alongside a series of underfunded rate increases. You've seen premiums and benefits start to be affected in the marketplace. Group premiums have gone up because of these price cuts. That is now driving a different behavior from group members and that's what we've picked up in this area. And we need to do a better job of being able to predict and anticipate the second and third-order effects when they come, but they are direct consequences of this transition. A second one, which we referred to and is really important within the Optum Health story for 2025, is plan exits. So we saw a very significant increase in the number of plan exits across the country last year. As plans chose to respond to the price-cutting pressure by essentially withdrawing their offer in multiple geographies across the country. And what we've seen is in unusually complete vacation of offers by certain plans. So to put it a different way, 100% of participants in a particular payer's plan had to find a new home. They had no way of staying in their old home. They had to find a new home. And what we saw when they came to us where we were still offering a plan option, we saw those members had not had the level of engagement in the prior six to eight months before they vacated that plan at the level you would have expected. That has a direct consequence on how they are understood in terms of the reimbursement model of the system. And that's what's driving a lot of our issues in Optum Health this year. But again, that is a temporary phenomenon, which gets fixed during 2025, but it is simply an example of one of the second-order derivative effects of the transition of absorbing this 9% or more percent decrease in pricing. None of that really speaks to the value of value-based care. Value-based care delivers a completely different approach of trying to ensure people have more years of health and less years of healthcare acute treatment, trying to get ahead of the illness, trying to avoid the high-cost consequences of late diagnosis, and tries to make sure that we are encouraging people to think about a healthy lifestyle, early engagement, making sure that we're heading off problems before they arrive. And we know that works based on multiple cohorts of patients that we've been privileged to have the right to manage. What we're going through, like the rest of the industry, is a dramatic, really never-seen-before adjustment in pricing for this marketplace. And what we're seeing this year is two or three areas where the pressure that that has created across the market is creating new dynamics we haven't seen. That's exactly what we're responding to here and we believe that they are largely addressable as we go through the rest of this year and in no way undermine our confidence in the value-based care strategy of the company. Josh, thanks so much for the question and I'll move on to the next question.

Our next question comes from A.J. Rice with UBS.

Thanks. Hi, everybody. Just to put a finer point on some of this discussion around especially what's happening at the MA side, it sounds like you're saying most of the elevated care that you're seeing is on the group side. And it sounds like you're putting more of that on the benefit and premium changes that have occurred rather than just an underlying uptick in utilization. I want to make sure I understood that. Also on the competitive exits and the impact of that, it doesn't sound like you're calling that out on the insurance side; you're just calling that out on the Optum side. And then finally on Part D, you had been cautious about that coming into the year, but you're not mentioning that at all. So is that playing out about as expected?

AJ, thank you so much for the question. Let me ask Tim to respond.

Yes. Good morning, AJ. Thanks for the question. Yes, so I'll hit those last two pieces first. So yeah, you're correct. We are really seeing this focused on our community Medicare Advantage and group Medicare Advantage books. So we're not seeing it on our chronic special needs population or our dually eligible population. Also, not seeing this care activity pattern in our newer members, either new to Medicare or new to United. And the care activity items that we talked about last year, provider upcoding, and some of the pressures on specialty drugs, I'm not seeing that play into this either. Those elements are both tracking very much in line with how we've planned. And when you think about the split, it is slightly more pronounced on our group business. But if you think about our overall fee-for-service business, it's just, I would say, just slightly more than the contribution that you'd expect on the group side. And while we certainly do see trends that suggest that where the premiums have increased, and members are paying a high portion of that, that is where we're seeing this pointed pressure on care activity on the group business. However, it's very likely that some of the same underlying trends that are generating higher care activity patterns in individual community MA are also at play in the group business.

And our next question comes from Lisa Gill with JPMorgan.

Thank you very much and good morning. Andrew, I just want to go back to the path to the long-term growth rate. You reiterated that you feel confident you can get back there. With the 2026 rates looking better, we're going to move into the final year of V28. How do I think about what the key elements are to get back to that long-term growth rate?

Thank you for the question, Lisa. We're pleased to see the initial recognition of rate increases that reflect the reality we've been missing for the past few years. We hope this trend continues, and that data will support it as we saw this year. It's also encouraging to see continued strong engagement with states in the Medicaid sector, ensuring that rates remain appropriate. Looking ahead, we anticipate a further reduction in pricing from the V28 model next year, which we must acknowledge. However, we believe we're nearing the end of the transition period and the pressure we've been experiencing. As a market leader, we are inevitably shouldering more of that pressure, but we feel confident in our ability to navigate through it. This year, we've encountered a few secondary effects that we aim to better anticipate and manage as we approach 2026. We believe that many of the challenges we face early in 2025 can be addressed in that year, allowing us to achieve stronger performance in 2026. We expect this to create a pathway back to our target growth momentum as an organization.

And we'll move to our next question from Stephen Baxter with Wells Fargo.

Yeah, hi, thanks. Just a follow-up on the trend discussion. Could you talk about where MA margins are now expected to shake out inside your 2025 guidance? And what you think is a reasonable timeline for covering the target margins? And whether there's any change to what you're thinking is a reasonable long-term margin target in this business post V28 and some of the issues you have adapting to it? And then again, the confidence level you can improve any margins in 2026 if trends stay at this level?

Stephen, thanks so much. I'll ask Tim to respond to that.

Thanks, Stephen, for the question. So the margins that we're anticipating consistent with the changes we've announced today are still within our targeted margin range for Medicare Advantage for 2025. As we look forward to 2026 and we include the increases in care activity that we're seeing both in the 2025 portion of our bid and also pricing for 2026. At this distance, we can accommodate those care activity levels and return to the historical planning target levels that we've always historically assumed.

Our next question comes from Erin Wright with Morgan Stanley.

Great. Thanks for taking my question. So on the policy front, I guess, what is your latest thinking in terms of just PBM reform? Your model has obviously evolved on that front, but also Medicaid funding cuts and what sort of permutations you could anticipate there and your ability to navigate that?

Yes, Erin, thanks so much. Let me ask Patrick Conway to respond to you on the PBM side and then Chris to maybe make a couple of comments on Medicaid, if that's okay. So Patrick?

Yes. Thanks, Erin, for the question. So first, in terms of policy, we are leading in the marketplace with transparency, choice, and affordability. And we've had three major announcements that I think both help drive the policy environment but also are a reason we've had significant market growth. 100% commercial rebate pass through. First, large PBM to do that. And you're seeing that drive a positive reaction in the marketplace and it's removing any lingering doubt about our incentives. We want lower list prices and lower net prices, as Andrew said. Second, removing 25% of prior authorizations over 10% of reauthorizations over 10% of prior authorizations making the system simpler, better, easier for consumers and clinicians. And then third, cost-based reimbursement for pharmacies. And it's really important to know this is for all pharmacies, all drugs, all clients rolling out. Already started rolling out and put across the entire book. And you heard from independent and community pharmacies their support of these changes. The last thing I'd just call out, just because it's new and it concerns us significantly, is the Arkansas Legislation that the governor signed yesterday around PBM and pharmacy ownership. We're honestly not sure what problem they're trying to solve, but let me be clear on the impact on patients. When you do that, we have Genoa pharmacies in the state providing integrated mental and behavioral health care. This could cut off access for those patients with things like schizophrenia and severe depression. You have specialty medicine, where we may have been serving a patient with cancer for years and imagine that patient now not getting their medicine in their home. You have home infusions for elderly Americans, where they may not be able to get out of their home and we're providing their medication. And you have home delivery for people in rural parts of Arkansas. We're significantly concerned about this. We'll work with the state in the regulatory process post legislation to try to address those populations and maintain access. But we want you to hear clearly from us that our concern is about patients and maintaining access to patients across the nation to these medicines.

All right. Patrick, thank you. Krista?

Yeah. Thanks for the question. So on the Medicaid side, I think we won't speculate on any really specifics, but what I do want to emphasize is just regardless of any changes, our priority remains the health of our members and ensuring that they have access to high-quality coverage. As it relates to our business, we have a really broad footprint across 32 states. We have a variety of programs and products and really decades of experience. So we remain confident in the value that managed care can provide to our state partners and our ability to support our states as they really navigate through any changes.

Thank you for your question, Krista. I appreciate it. Reflecting on the pharmacy segment, I believe Patrick provided a clear outline for you, Erin. Moreover, I was pleased to see the President's recent executive order indicating an interest in examining various aspects of the pharmacy value chain. One of the more disappointing trends over the past couple of years has been the focus on the role of PBMs compared to others in the system. A careful reading of the executive order reveals some sensible questions aimed at understanding the dynamics surrounding PBMs, including manufacturers and network providers. The PBM's unique position is instrumental in reducing drug prices for Americans, often operating on very slim margins and assuming substantial risks. This is how PBMs gain new business – by effectively lowering drug costs for clients, which allows them to secure additional accounts. This approach differs significantly from how the rest of the system functions. I'm hopeful that as the administration delves into the inquiries prompted by the executive order, there will be a more comprehensive evaluation of the entire value chain rather than focusing on a single segment, which could lead to serious mistakes that might adversely impact patient access. I found the administration's stance encouraging. Thank you again for your question, Erin. Let’s move on to the next one.

And our next question comes from Andrew Mok with Barclays.

Hi, good morning. I was hoping to get your thoughts on the risks and implications of tariffs, particularly around the impact of pharmaceutical tariffs that are currently being contemplated by the administration.

Yeah, Andrew, thanks so much for the question. Obviously, it's a dynamic situation in terms of what may happen around pharmaceutical tariffs. Obviously, going to be a process now where the administration goes through its analysis and investigation. So we obviously don't know what may or may not come from that. But when we look at our potential exposure to that, we feel pretty good. In fact, I'd say better than pretty good in terms of the degrees of price protection mechanisms we have in pre-existing contracts and also various pieces of legislation, which also limit the ability of manufacturers to pass price increases down through the system. So at this point, and again, given that we don't know what any tariff may or may not be, but when you look at the structure of the marketplace, we feel pretty well positioned for that, Andrew. Next question?

And our next question comes from Dave Windley with Jefferies.

Hi, good morning. Thanks for taking my question, Andrew. I appreciate your comments about kind of the macro cost of healthcare in the United States. We have an administration that seems more focused on budget deficit reduction, which entails cutting to healthcare. I guess my philosophical question here is, why isn't modest, persistent underfunding of the system the right way to get those costs more in balance and to force innovation in the system, and how does United operate in an environment that might bring that without having the snafus or whatever that a V28 model brings?

Thank you for the question, David. It's a significant and insightful one. I believe we need ongoing strong innovation in new methods that connect various elements of the healthcare system to create a more patient-centered impact. While there is no lack of innovation in healthcare, particularly in the U.S., it often appears in isolated instances—whether that's a new device, drug, or care model. We invest heavily in innovation, but the return on that investment is not evident. This is largely because we fail to integrate these innovations effectively. We don't align incentives or rethink workflows, nor do we focus on achieving the best long-term outcomes for patients. The goal should be to maximize the number of healthy years a patient can experience, which is the essence of value-based care. UnitedHealthcare is dedicated to fostering this innovation, and we have made remarkable strides in this area. However, we have recently observed that V28 has disproportionately targeted the most innovative areas for price cuts. This pressure has fallen onto a program (Medicare Advantage) that was intelligently designed by the government to incentivize high-quality care experiences and cost efficiencies. The system was created to benefit everyone involved—participants provided with great care experiences and the government receiving rebates. Unfortunately, V28 took a blunt approach that has disrupted this balance. While we understand the need to manage healthcare budgets, it is vital to consider the entire system and implement tools that address overall costs effectively. We know Medicare Advantage is more cost-efficient than traditional Medicare. When enrolled in a fully delegated value-based care clinic like Optum Health, Medicare Advantage patients demonstrate even greater savings for the system along with enhanced personal experiences and clinical outcomes. These integrated approaches represent the way forward. I hope the executive order on pharmacy will inspire similar systemic thinking. In response to your question, yes, it is possible to deliver high-quality healthcare at lower costs while improving experiences and clinical outcomes for both patients and the government. That aligns with UnitedHealthcare's mission and the objectives of value-based care and Optum Care. Let's move on to the next question.

And our next question comes from Ben Hendrix with RBC Capital Markets.

Hi, thank you very much. I wonder if we could touch briefly on Medicaid. Just wanted to get an update on what you're seeing from state renewals through April and if we're still on track to close that rate acuity gap by the end of the year.

Thanks so much for the question. I'm going to ask Krista to answer that for you.

Thank you for the question. We are pleased with the progress we made on rates in the second half of 2024, which has carried over into our 1/1 rate cycle. As John and Andrew both noted, the disparity between the acuity of the population and rate funding is decreasing with each cycle, along with some off-cycle adjustments we have observed. It is still early to determine the rates for 7/1, but approximately 35% of our revenue renews in that cycle. With each cycle, that base data reflects more recent experiences. Therefore, we remain hopeful that, with the collaborative relationships we have with our states, this gap will continue to close over the course of the year.

And our next question comes from Lance Wilkes with Bernstein.

Great, thanks. Could you talk a little bit about the first-quarter MLR impacts and maybe breaking out the impacts that were driven by the premium increases that you described and maybe any sort of deductible increases? But also were there impacts as a result of the way in which you're approaching prior authorization, any changes in that? And then do you have a sense as to maybe increased follow-through from your house calls and primary care actions as far as getting follow-up visits tied to risk adjustment activity? And lastly, were there any one-time good guys in the first quarter, which perhaps supported medical loss ratio and caused the distinction between 1Q versus guidance?

Thanks so much, Lance. John Rex.

Good morning, Lance. To address your last question, there were no one-time factors in the quarter that would have had a positive impact. Regarding your first point about any changes in preauthorization procedures, there hasn't been any effect in that area. Tim mentioned that while our group experienced a significant increase in wellness business during the quarter, these elements aren't the key drivers. They are effective and inexpensive and do lead to additional specialty care. However, we are unsure if the high volume of wellness visits was seasonal or if it indicated a shift in seasonal patterns. Some populations saw wellness visits at double the levels of last year, while others were at about 50%, but the increase was widespread. Another factor to consider is the change in seasonality due to the IRA-driven Part D changes, which impacted roughly 90 basis points in the quarter. This was not something that was fully anticipated in many analyst models for various reasons, including the effects of IRA changes. Additionally, Medicare funding reductions as we enter the second year of V28 also had an impact, estimated at around 60 basis points. I could elaborate on many aspects, but these are the key factors. However, the most significant impacts in the quarter were the increased utilization and the member profile elements we've highlighted throughout this call.

And our next question comes from Sarah James with Cantor Fitzgerald.

Thank you. I just want to circle back to the tariff question quickly. Are the penalties under the IRA for pharma manufacturers who raise price above inflation enough to protect you from tariffs pass through on Medicare? And I'm not sure if that implies to exchanges as well, but with those bids due earlier, like April to June, do you have to assume that tariffs are in place or do you think the states will give you some flexibility to submit two versions of bids with and without tariffs?

Listen, Sarah, thanks so much for the question. So as I said earlier, obviously, we don't know yet what if when might happen in this territory. So like you, we're watchfully waiting. As you alluded to, there's many kind of layers of government protection, if you will, within the regulations that over the drug companies in terms of their ability to increase price above inflation. There are things like Medicaid best price protections, specifically in the Medicaid area, which would also have potential applications here. And then, of course, we have our various Optum Rx, where relevant in this conversation have their own contractual price protection. So there are multiple layers of that. Obviously, we're going to be very carefully making sure that we bid in the context of that kind of mesh of protection and make sure that we do that as thoughtfully as we possibly can. But I just also want to reiterate, like everybody else, we don't know yet what the reality of this is, but we're very attuned to it. And I think I've tried to share with you our sense that it should not be a significant exposure for us, but certainly not this year. And we'd be working very thoughtfully about bids and the rest as you suggest for next year. We have time for just one last question.

And our last question comes from Jessica Tassan with Piper Sandler.

Hi, everyone. Thank you for the question. I wanted to ask about UHC's impressive growth in Medicare Advantage this year, with an increase of 521,000 members through April, nearly half of which comes from C-SNP plans. Can you provide more details on UHC's leadership in the C-SNP market? What benefits do these plans offer to beneficiaries? Why has UHC been so successful in this area? Additionally, what does C-SNP enrollment indicate for UHC's economic outlook in 2025 and in the long run?

Thanks, Jessica. I'll ask Bobby Hunter who looks after our M&R business to respond to that. Bobby?

Yeah. Thanks, Jessica for the question. So I would say really just overall, we're very pleased with our year-to-date growth in Medicare Advantage. And as you know, we continue to be on track to deliver on the full-year growth target of up to 800,000 members. The momentum we had in AEP carried over really nicely into OEP, including notably strong retention of our existing members, and then really diversified growth across our community HMO plans, full dual plans, and the plans you mentioned that are designed for members of chronic conditions. So really both from a mixed volume standpoint, we feel really good about where we sit in '25 and the outlook that that gives us around the membership growth. And I would just note really that the Medicare Advantage Plans that we offer, you know, the great work that we do from a value-based care integration standpoint with a collection of our providers, both internal and external really position us well to manage these members with chronic complex conditions. And we're very proud to continue to get to serve more of those members, as we progress throughout the year. Thanks so much for the question.

Bobby, thanks so much. And I'd like to thank everybody for all of your questions. We appreciate your engagement very much today. While we’re not satisfied with our performance to the start of 2025, I hope you heard today our determination to improve and our enthusiasm about the path forward. We remain deeply committed to the value-based care strategy of the company we believe that is the way to solve many of America’s healthcare problems both from a cost perspective but most importantly from a patient experience and outcome perspective. And I think you many of you who know United well will also know and recognize that when we encounter an issue, we figure out how to work it and how to deal with it. And rest assured, we all at United are going to work our issues that we've encountered in the first quarter, solve them. And you should count on us to continue to strive towards delivering for everybody we serve and to make sure that the growth of this company returns to the kind of ranges that you would expect of us. With that, I'd like to thank everybody for your time today and we appreciate it.

And ladies and gentlemen, this concludes today's call. Thank you for your participation. You may now disconnect and have a great day.