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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good morning, and welcome to the UnitedHealth Group First Quarter 2019 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 the U.S. federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations. A description of some of the risks and uncertainties can be found in the reports that we file with the Securities and Exchange Commission, including the cautionary statements included in our current and periodic filings.
This call will also reference non-GAAP amounts. A reconciliation of the non-GAAP to GAAP amounts is available on the Financial Reports and SEC Filings section of the company’s Investors page at www.unitedhealthgroup.com. Information presented on this call is contained in the earnings release we issued this morning and in our Form 8-K dated April 16, 2019, which may be accessed from the Investors page on the company’s website.
I'll now turn the conference over to the Chief Executive Officer of UnitedHealth Group, David Wichmann.
Good morning, and thank you for joining us.
Today, we reported a strong start to 2019 with revenues up 9%, adjusted earnings per share growing 23% and return on equity of nearly 27%. Optum and UnitedHealthcare each contributed fully to this performance.
With confidence and continued momentum, we are raising our earnings expectations for 2019. The continued growth and earnings performance of our business is a byproduct of our focus on providing exceptional returns to society by improving healthcare affordability, outcomes and the patient experience, what some refer to as the triple aim.
This orientation frames our growth strategy, informs capital allocation decisions and shapes the operating plans for UnitedHealth Group's businesses, all directed towards attaining the promise of our mission. It's that same mission strategy and approach we have pursued since 1998, when UnitedHealth Group was well less than a tenth its current size and when our strength and our line capabilities and capacities did not nearly match our ambitions for the health system as they do today.
Over that 20-year time period, UnitedHealth Group has applied competencies in data, technology, clinical insights and well-formed innovation and adaptive traits to drive change and grow strong market positions in the large and fast growing healthcare end market. Our outlook for growth continues today as the pace of innovation and our capacities for change advance in a market restless for achieving improved value, access and coverage in a sensible and durable way.
The first quarter saw several developments illustrating some of the strongest progress yet on this journey, which we expect will build considerable shareholder value. In pharmacy care services OptumRx announced that point-of-sale consumer discounts on branded pharmaceuticals will be its fundamental approach to business. And UnitedHealthcare is well underway implementing point-of-sale discounts at scale for the more than eight million consumers covered through its commercial risk business.
At the counter, people are already saving about $130 per eligible script and we are prepared to participate in the CMS demo project for Part D effective January 1, 2020 to drive great – even greater pharmacy value for more people.
In digital health, our initiatives are accelerating. We completed beta testing of the individual health record physician platform and have built over five million active consumer health records. Simultaneously, our enhanced Rally consumer digital health platform now integrates digital engagement, coaching, telemedicine, and incentives with quality and advanced cost transparency and estimating capabilities.
We provide access to both proprietary and third-party services in areas such as exercise, weight, sleep, employee assistance, nutrition, and other value-based programs. In its initial 1 million member deployment this year, the enhanced Rally experienced a 13% increase in consumer engagement. We expect those numbers to further advance as the IHR and other functionality are added.
As part of our strategy to reinvent health care delivery, we apply Rally and the IHR together with OptumCare's practice capacities to advance efficacy and value. We are progressing toward the close of the DaVita Medical Group transaction and we look forward to adding more markets, more doctors, and clinical staff serving more patients.
And we continue to modernize the financing of delivery systems, whether they are owned by Optum or accessed through more modern UnitedHealthcare benefit designs across all market segments. These benefit designs will be more consumer responsive and address social determinative care, especially for those who are most affected and who have the greatest and most complex needs.
Nearly 80% of what influences the person's health relates to non-traditional medical and behavioral issues such as food, housing, transportation, and health care finances. Improving care for society is behind our partnership initiative with the American Medical Association to standardize how data regarding critical social and environmental factors is collected, processed, and integrated.
Nearly two dozen new ICD-10 codes will be used to trigger referrals to social and government services to better address people's unique needs connecting them directly to local and national resources in their communities.
Finally, our Net Promoter Scores continued to advance meaningfully in the first quarter 2019 as we march towards an aggressive target of 70 by 2025. The people we serve will benefit as we advance quality and value and in turn, provide growth and returns for shareholders.
Before I ask Andrew Witty to update you on Optum, I know there has been public discussion about Medicare for all proposals. We view the discussion first through the prism of our mission and how individuals can be better served and the health system can work better for all. From their perspective, we welcome the contrast between these proposals and the kind of real progress we are talking about on this call and discuss with you at our November conference founded on durable and modern information, technology, and clinical capabilities.
The wholesale disruption of American health care being discussed in some of these proposals would surely jeopardize the relationship people have with their doctors, destabilize the nation's health system, and limit the ability of clinicians to practice medicine at their best. And the inherent cost burden would surely have a severe impact on the economy and jobs, all without fundamentally increasing access to care.
The path forward is to achieve universal coverage and it could be substantially reached through existing public and private platforms. Meaningful progress in health care lives and national and state leaders continuing to work collaboratively with the innovative and proven private sector solutions to achieve the goals we all want, a modern, reliable, informed, and aligned health care system that offers the access, choice, and coverage protections people seek at a fair cost to the individuals and society as a whole.
Together, we need to operationalize real changes that promote an interoperable secured digital infrastructure allowing information to be shared securely and widely so proper clinical decisions can be made and acted upon by qualified physicians with aligned incentives for achieving better outcomes.
Changes that eliminate unnecessary and costly regulatory frameworks and taxes that address underinvestment in social determinants of health, and changes that encourage people to take accountability to modify lifestyle behaviors that drive a significant percentage of their lifetime health care needs.
The best system is one, which is informed, engaged and aligned where people, their doctors in the private and public sectors work together to improve or sustain individual health while improving the performance of the health system for everyone.
We are encouraged to see the United States is on an improving path. For 16 straight months, the healthcare's relative economic burden on society has lessened. While recent year-over-year spending growth at just over 4% is still too high, it is less than considerably due to the better management of price inflation and the earlier and more effective management of care and lower cost settings.
The progress and ideas we have and we'll discuss further today will take healthcare to an entirely new level of quality, cost, choice and coverage in a proven and lasting way, ensuring the U.S. health system better serves and supports all Americans.
Now, let me turn it to Andrew Witty, CEO of Optum to discuss Optum's focus, strong operating and financial results, and growing forward momentum. Andrew?
Thank you, Dave.
Our next chapter involves accelerating digital, transforming pharmacy care through OptumRx and reinventing healthcare services through OptumCare. While, allowing all of Optum's resources to better serve patients directly and supporting the work of physicians, hospitals and health plans who also serve them.
Primary care represents well under 10% of medical cost that has a profound influence on the other 90% of the cost and quality of care. Within OptumHealth we offer densely rate, local care options built on a foundation of owned and operated primary care alongside aligned networks, together improving how the health system is accessed and used downstream.
Today, we serve millions of patients across the approximately 80 health plans and payers, in this year virtually every local OptumCare practice will participate in advanced value-based care arrangement.
Our clinical team continues to advance performance with our physicians delivering, better quality outcomes with 99% to seniors served through advance value-based arrangements receiving a star rating of four stars or higher.
Delivering lower costs with practices serving Medicare Advantage participants at as much as 30% lower cost than original Medicare, and 10% to 15% lower than typical Medicare Advantage, and with higher satisfaction with an NPS of just under 80.
In addition to primary care and local communities, we own and operate surgical care centers, neighborhood urgent care center, community pharmacy dispensaries, and in some markets, hospitalist and specialty and ancillary care capabilities, such as office space consist of specialty pharmaceuticals and oncology services.
For example, our new OptumCare Cancer Center in Nevada takes an integrated, multidisciplinary approach to providing patient centric care in a professional and compassionate setting. This outpatient program delivers integrated medical, surgical and radiation oncology, chemotherapy and immunotherapy, imaging, palliative care, and 24-hour oncology urgent care.
This is one of the ways we are exploring value-based specialty model that uniquely aligns while our primary care and ambulatory capabilities, grounding in a physician led culture of evidence-based medicine and enhanced by academic and community partnerships. All of these services produce better outcomes than outdated and costly facility-based alternative and generate high NPS, because the patient experience is distinctively better.
We're accelerating the process of connecting these elements to create informed comprehensive open-market care systems seamlessly supporting the patients we serve, all on a fiercely multi-payer basis, while supporting physicians seeking to operate practices at their fullest clinical capabilities.
Our journey of adding and enabling new locations to extend the reach, while deepening our clinical offerings will continue to improve our impact for years to come. We are architecting a more broadly informed, engaged and aligned healthcare system, one that responds better to consumer preferences while easing the burden of healthcare on society.
This quarter's growth in revenue per consumer served 14% of last year indicates we’re taking responsibility from a more of a consumer's health and serving them more deeply and compressively.
On March 12, OptumRx extended our leadership on negotiated drug discounts by announcing that we will only serve new employees onto pharmacy benefit business after January 1, 2020 that provides consumer discounts to the point of sale. This replaces the current system, which employer's typically elect to flow rebate back to all plan participants to lower their premiums.
Benefits of this new approach are clear. Our data shows patient's prescription adherence improves up to 16% depending on plan design and we know patients health ultimately improved, when they follow physician orders for drug regimens. This approach is been proven to achieve medical cost savings of up to $300 per member per year and we have received strongly positive feedback from employers, employer coalitions, industry observers, regulators and policy leaders.
We're also seeing strong response to PreCheck MyScript which offers care providers instant information on efficacy cost and alternative drug choices directly within the physician's workflow. Nearly 150,000 physicians are using this technology now, up 77% since December.
Our near-term plans for pharmacy care services remain focused on achieving the highest quality outcomes, the lowest net cost of drug for patients, and the best patient experience. Market response continues to be outstanding. 2019 was a good sales year for us. And with robust RFP activity and a couple of significant wins already, 2020 should be even better.
OptumInsight the technology and analytics engine of our enterprise continues to provide our customers strategic insights to improve health system performance. We're in the process of launching a newly develop services and technology offerings with our state customers.
These end-to-end approaches used advanced technologies to modernize traditional Medicaid administrative offerings, including the comprehensive integration of cutting-edge Optum Analytics services and capabilities deeply enhancing the breadth depth and effectiveness of these state administered offerings.
As Dave mentioned in consumer digital health, we've started beta testing the consumer version of the IHR and envision a stage deployment starting around mid-year. We also studied the impact of deploying the IHR for people in the Medicare, Medicaid and Commercial markets and found better outcomes, lower cost and improve patient experience. When placed in the hands of a qualified high-performing doctor in a value-based system, the IHR meaningfully reduces healthcare costs.
In a similar way, on March 28, we launched a consumer version of the PreCheck MyScript technology called MyScript finder. Rally now has over 24 million registered users, having grown adoption by over two million people in this quarter alone.
Consumers earned a record $200 million in rewards in the first quarter, demonstrating their high engagements. And forward thinking employers have made more than $1 billion in annual rewards available to people who've taken actions to improve their own health.
Our software engineering are now building digital payment and physician office visits scheduling capabilities and deploying artificial intelligence and biometric data to improve post-acute patient recovery and reduce hospital readmissions.
Rally and platforms like the IHR are just two critical elements of the more modern information and digitally enabled health system. Particularly when coupled with rewards and support tool they enable physicians to more effectively manage their patients at scale.
Turning to Optum's financial results. First quarter revenues of $26.4 billion grew 12%, led by OptumHealth growth of 17%. We added $7 million adjusted scripts achieved 14% growth in backlog and now serve two million more people at OptumHealth.
Optum's operated margin of 7.1% expanded 10 basis point over last year's first quarter, contributing to 14% growth in operating earnings to nearly $1.9 billion in the quarter. These results illustrate our steady momentum as customers respond to the innovation insight and the value that Optum provides.
Now I'll turn the call over to Steve Nelson, UnitedHealth's CEO.
Thank you, Andrew.
The market is responding to UnitedHealthcare's practical innovations, personalization and service performance on behalf of those we serve. Within just the past quarter, we've been awarded contracts to serve Medicaid beneficiaries in North Carolina and Arizona. And again drove strong growth in serving people in Medicare Advantage and dual special needs plans.
Our innovative Navigate4Me service addresses the personalized holistic care needs of our senior population. Medicare Advantage seniors with complex health issues like diabetes, congestive heart failure or multiple chronic conditions received concierge service from nearly 1,000 dedicated experts. Each serves as a single point of contact for the seniors.
Our navigators provide support for clinical and administrative needs, help patients follow their personalized care plans, coordinate care and address social determinants of health. Key to delivering this flexible personal service is the proprietary technology platform that supports navigators with integrated data, analytics and information specific to each patient and the results have been impressive.
We've seen a 14% reduction in hospitalization for people with congestive heart failure. And overall 19 point increase in NPS from patients who received our direct support. We're also better coordinating medical services through locally organized systems of care, highly capable of physical digital and virtual care delivery.
Our data shows that seniors in our Medicare Advantage Plan C on average about one-half the number of doctors have similar seniors using original Medicare. This means a simpler, less confusing experience and better outcomes for patients and better use of scarce health system resources overall.
It is not a coincidence that seniors are enrolling in private Medicare plans at a record pace with one-third of the nation's seniors served today by the private market. Collectively, Medicare Advantage plans provide significant savings and invest those savings in superior benefits not available under original Medicare.
Medicare Advantage fills in the significant gaps left by original Medicare, including coverage for pharmacy, dental, vision, hearing and personal wellness and fitness needs. Again, none of them are covered by original Medicare.
This strong trend toward greater use of private services includes the state Medicaid programs, for states are increasingly asking the private sector to take responsibility for the care of their most complex and chronically ill beneficiaries.
Managed care has a track record of reducing cost by better coordinating care for these people, while helping them become healthier. Looking at our first quarter financial performance, UnitedHealthcare's revenues grew 8% to $48.9 billion, serving three-quarters-of-a-million more people domestically with medical benefits in the quarter, led by growth in Medicare Advantage and in serving self-funded employers. UnitedHealthcare's operating earnings grew 23% over last year to nearly $3 billion in the quarter, with operating margins expanding 70 basis points to 6%.
We are hard at work on enabling our business for future growth. In Medicare Advantage, we believe we are well positioned to advance our market share. Further implementation work for recent Medicaid awards is in progress, coupled with our strong activity in the commercial group Medicare and global markets we expect to continue to drive sustained and diversified growth.
Now I'll turn the call over to UnitedHealth Group's Chief Financial Officer, John Rex.
Thank you, Steve.
Our initial quarter for 2019 positions us well to deliver on our full year financial commitments. To recap, revenues grew 9.3% to $60.3 billion, even after considering the negative 1.4% impact related to the health insurance tax deferral for 2019.
In the first quarter alone, this deferral helped improve affordability for the people we serve by more than $700 million. This tax adds billions in cost to system and constrains access and benefits for Americans. We continue to advocate and are hopeful for its permanent repeal.
In the quarter, the more than $5 billion revenue increase was led by same-store growth, well balanced across our benefits and services platforms. Medical cost trends continue to be well managed and consistent. Our view of forward trends and our first quarter medical care ratio of 82% continue to support our full year outlook for an MCR of 82.5%, plus or minus 50 basis points.
Favorable reserve development, up $300 million was consistent with the year ago level. And medical payables at 49 days were also stable with the year ago level. Earnings growth in the quarter was also driven by improvements in our operating cost position.
While the health insurance tax deferral lowers the operating cost ratio, beyond this factor, strong improvements in productivity more than offsets our ongoing investments to drive growth for the future. We will continue to pursue such investments as our focus remains firmly on the decade ahead. Overall, operating margins expanded 70 basis points over last year to 8%. And first quarter adjusted earnings per share up $3.73, grew 23% over last year.
First quarter cash flows of $3.2 billion were consistent with our expectations, recognizing that comparison with last year was affected by the health insurance tax deferral. Recall that reported cash flows were limited in the first three quarters of 2018 by collecting the health insurance tax from customers over the course of the year and then impacted in the fourth quarter by the $2.6 billion payment to the U.S. Treasury.
Additionally, we would note that certain government payments received in the second quarter of 2018 are not scheduled to be received until the third quarter of this year, simply due to calendar time.
All-in, we expect second half 2019 cash flows will be meaningfully above last year's, most notably in the third quarter, with second quarter commence slightly lower. We continue to expect double-digit percentage growth in cash flows from operations in 2019 to a range of $17.3 billion to $17.8 billion.
We continue to put capital to work to build the business for the benefit of both society and our shareholders with a robust organic and inorganic growth agenda. We are currently active in each of the five growth pillars previously detailed as we look ahead 10 years and expect to grow and diversify our earnings streams inside this focused, dedicated health care company.
We also returned $3.9 million to shareholders this quarter through the present and share repurchase activity. And return on equity was strong at 26.8%, rising 300 basis points from one year ago.
Looking forward, we entered the second quarter with strength, flexibility, and rising confidence in the positive impact we can have this year and far into the future. We continue to expect strong growth in adjusted net earnings in 2019, and have increased our outlook to a range of $14.50 to $14.75 per share. That would bring for one-year earnings growth rate to 13% to 15%, and our five and 20-year compound earnings growth rates to approximately 20% per year.
Dave?
Thank you, John.
Over the past 45 years, UnitedHealthcare Group has grown consistently through the full range of macroeconomic, health care, legislative, and policy conditions, adapting and adjusting to deliver value for all those we serve in ever-changing environment. That value is rising at an accelerated pace.
As we execute against our multidimensional growth agenda and health care delivery, pharmacy, digital, consumer response to benefits and global. These efforts for suited scale position us uniquely as a technology-enabled healthcare company, delivering distinctive results to our customers and to society.
Taken together with our commitments to service, quality, and NPS, our investments in the coming wave of health care innovation, a movement we intend to lead and our multi-year, multibillion-dollar effort to improve our medical and operating cost basis for the benefit of our customers, we expect sustained growth and performance for UnitedHealth Group this year, in 2020, and for many years beyond.
Thank you. We will now take one question per caller please.
[Operator Instructions] Our first question is coming from Peter Costa with Wells Fargo Securities. Please go ahead. Your line is open.
Good morning, and thank you for the Medicare for All discussion. Now it's your job to get your members and healthcare workers and employees to understand the same message that you gave to us. Moving on to the rebate structure, as drug rebates go away, can you tell us what that will do to margins in your PBM and to premiums in your healthcare plans?
First, Peter thank you for the acknowledgment of the Medicare for All commentary. We will definitely fall-through to make sure that this is well understood because we think the options are clear between the government sponsored or government run system and the one we have to offer. So we'll make sure we keep moving in that direction.
Andrew, you do you want to take the pharmacy question?
Peter thanks for the question. I just like to make a couple of introductory questions and then I'll ask John Prince to say, comment specifically on the margin element.
I think in terms of this whole rebate conversation that's been going on, there were really two elements to this that we really need to keep a very close eye on. The first and most important of all of this is what is going to be the ongoing mechanism to ensure pricing discipline for pharmaceutical products.
As you well know the only mechanism that exists today is essentially the volume that’s aggregated by companies like OptumRx to be able to then negotiate effectively with pharmaceutical companies who otherwise would have complete independence on what they do with their list prices.
That’s something, which must not be lost in this set of conversations and discussions, which are going on at this time. There is a real risk that if there is a situation where rebates or a mechanism to replace rebate was not in place because the significant drug price inflation, over the next years that would set back a huge amount of the efforts that being achieved over the last 10 or 15 years to try and bring more control to this area.
The second part is -- to your question and I'll ask John to really give you a little bit more detail is, obviously, the migration for a company like OptumRx. And John has led a very successful strategy in first of all diversifying the pharmacy servicing offering from OptumRx, and secondly moving into a modern physician of passing forward at this point-of-sale to consumers.
You've seen a lot of progress there this quarter, and also developing the way in which we work with our customers to ensure there are mechanism of compensation for the service we delivered is less and less dependent on rebates, the vast majority of which we passed through to our customers.
John, if you like to add any specific detail?
Peter thanks for question leading on OptumRx. We've been working for years on transforming our pharmacy care services in two ways; one, is expanding how we deliver value to our clients who are integrated medical behavioral pharmacy experience, lets focus on total cost of care and health outcomes.
We've also been very focused on driving the transparent business model where more and more of our revenues coming from administrative fees value sharing mechanisms that align us with the consumer the client's needs. So with that context, we see over time minimal impact from our margins, because if you look at the rebates and discounts that we managed.
Overall, rebates only exist on 7% of prescription, 90% of what we manage is generic with no rebates, 10% is brand and subset to that is rebatable drug, when you look at in the Medicare market today none of that value we’ve managed from a discount rebate is held by us, it's 100% is passed on to our clients. And fully disclosed with CMS the 100% is passed on the Medicaid market, within our total client base. 98% of our discounts are passed on to our clients.
So when you look at an overall standpoint, we're driving that value and passing on to our client. Over time that remaining 2% is a client choice and how they want to pay for our services. And so our believe is that overtime that remaining 2% we would work with our clients to look for other alternatives for them to pay for our services, which we are actively encouraging to manage, how we get our paid for our services.
We'll take our next question from Dave Windley with Jefferies. Please go ahead. Your line is open.
On Medicaid, wondered if you could comment on the progress in fixing or improving the performance of the handful of markets that you've called out in prior calls and in that context maybe comment on your decision to exit Iowa? Thanks.
Sure. We'll do Dave. We're seeing nice progress in Medicaid. Year-over-year we saw nice progress in the quarter. But I think I'll have Heather Cianfrocco our CEO of that business. Over to you - those for you.
Heather Cianfrocco leading Community & State. So as you mentioned, yes we highlighted that we had pressure in a handful of markets. Last year, we continue to make progress as David Wichmann noted. We saw this quarter some nice growth in our operating earnings year-over-year and we also saw a couple of good wins. So you heard us talk about North Carolina as well as our Arizona Intellectual and Developmental Disabilities contracts. We also saw strong decent growth.
I'll tell you that, with respect to that handful of markets, we've made progress in most of them and we're working to improve our performance. Our performance still is not exactly where we expected to be, and we'll continue to work on that through the year and you can expect to see improvement there. But Iowa was some of those markets.
And unfortunately, even though we have put the same work into Iowa, there was a funding increase last year by the administration, due to systemic underfunding of that program over the years, inability to catch-up with what continue to be medical cost pressure and some really unique system design elements of that program recognized across the industry we were unable to make that a sustainable market for us and continue to deliver the high-quality services that we believe Iowa deserves from UnitedHealthcare.
So we did make the decision to exit that market. You'll see us exit Iowa, unfortunately by June 30th. We're proud of the services that are employers predominantly have delivered in that market and the impact we think we've made on the hundreds of thousands of Medicaid members. But with respect to the rest of the markets, we're continuing to make progress. We think we'll see improvement in some funding cycles that are – they are upcoming over the next few months and we're on track with our performance optimizations.
Great. Thank you.
Dave in summary nice improvement quarter-over-quarter, first quarter, a solid operating earnings growth despite negative impact of the HIF. But I think it's -- also should be said that we're still underperforming in this business and it'll probably take us until 2020 to get to our full performance expectation which we're performing at a margin somewhere in the 3% to 5% zone.
Our next question comes from Justin Lake with Wolfe Research. Please go ahead. Your line is open.
Can you give us an update on progress with the government around the DMG acquisition? And would also appreciate any commentary around management decision to do about two-thirds of the full year share repo in the first quarter? Thanks.
Sure. I'll take DMG and then John Rex can take share repo. So we remain very excited about this opportunity to expand geographic reach with DMG and to serve more people. It is a critical part of the strategy that we have around reinventing health care delivery to access more markets and at the same time then go much deeper into those markets to make them work much more effectively.
At this stage, we have a clear path to approval in closing of the transaction, but unfortunately, we cannot comment on further details or timing at this stage. We are working through a couple of matters that remain. John, you want to touch on repo?
Sure. The $3 billion of share repo that we did in the quarter is against our $4 billion to $5 billion full year outlook. It is about the same percentage that we did in the year ago quarter. Also we did $2.65 billion in the year ago 1Q. So we also did a significant portion of our full year in that 1Q.
Certainly, I would say that market conditions warranted that if we look at this year particularly warranted that we accelerate our timing on share repurchase. We try to maintain good flexibility in terms of how we approach that program and also maintained good flexibility in our balance sheet overall. So that was kind of -- that was really decision was premised on.
Our next question comes from Steven Valiquette with Barclays. Please go ahead. Your line is open.
So I have a high-level question on Medicare Part D related to the rebate proposal. I think when we spoke at our conference last month and the view was that UNH and other Part D players could prepare multiple bids to cover all the different scenarios for 2020. Even now with the CMS guidance stating that plan sponsorship data on the current status quo, but then we'll provide protection with that demo program. Now the question is I'm curious if you think this demo program is a fair compromise for Part D plan sponsors? Or does this make you have to perhaps rethink your Part D bidding strategy for next year? Thanks.
Yes, it certainly can be. But Brian, you want to touch on that Brian Thompson?
Steven, Brian Thompson here. We certainly support the administration's effort to lower drug cost for seniors. I do think that over the long-term, this could provide lower pricing, we have better transparency, but we want to balance that as he suggested against premium increases here in the short term.
For context, if we exclude members today without any cost sharing, we suggest that perhaps the one-third will benefit in the near term leading two-thirds perhaps. We're soft as you mentioned timing right now remains uncertain, but CMS clarified the bids should assume the current rules as they apply. And as you mentioned, CMS is providing some protections in form of a risk corridor, that plans it had lowered premiums with rebates, we'll be able to apply and we're certainly appreciative of that guidance.
I will suggest that it won't fully mute an increase in member premiums, but will be helpful. We certainly intend to participate in the demonstration to the extent the new rule does impact our plans. I will say that I don't think the corridor protections are going to meaningful change bid strategies, or competitive behaviors.
It's important to remember, these are partial protections and they only apply if the rule passes, so plans need to be disciplined in their pricing regardless. I will just leave with the comment around this context. Important to remember, we're only talking about rebates and where they apply, as they've ever been retained by plans, whether that's point-of-sale or in premium and when. So while there's certainly some uncertainty, we appreciate the addition clarity that we've received from CMS and we'll be ready to bid here in early June like we always are.
So it is a constructive step forward. One that is born in the collaboration between CMS and the Part D carriers and we look forward to participating in the Part D program.
We'll take our next question from Frank Morgan with RBC Capital Markets. Your line is open. Please go ahead.
We'll stay on rebates. I'm just curious with regard to the recent announcement you made, any interest so far or any color around what your current self-insured customer base? How that's being received? And do you think that will any way affect new business when you going into 2020? Thanks.
I think there's growing interest, broadly. But, John Prince, you want to start with OptumRx?
It's John Prince with OptumRx. I'd say, first of all, one; we are pleased with why we did it, because there's significant bias from a consumer affordability standpoint. And so, I think, when you have conversations with customers and with other stakeholders, they're very interested in what is the impact of the discounts that we have negotiated on behalf of our clients and its material. So its $130 of value per script -- per eligible scripts which is material.
The value in terms of driving higher adherence is also important from a health outcome. So, when we have conversations with our clients, they're very interested in our data and understand how it's impacted consumers. We've had very positive interactions and feedback on it.
So I'd say, when you look at the health plan market in addition to UnitedHealthcare, we've had strong interest with our other 45 health plans, where a lot of them are actually looking at how they would incorporate that. And so, I think, there is strong interest in other clients that are on health plan basis to adopt it.
When you look at the employer market, there's strong interest in new clients as well as existing clients interested in how to phase that in overtime. And remember, in terms of what we announced, this does not affect our 1/1/20 selling season. This just requires everybody after 1/1/20, so starting January 2, 2020.
So a bottom line of that, Frank, was there's growing interest in the market. It's a little bit slower to adopt. We'd like to see faster adoption. And we are clearly taking a position to, at least, for a certain plan designs to make sure that consumers are getting those discounts to apply it at the point-of-sale, which we know improves adherence and hopefully will improve their long-term health. Thank you for the question, Frank. Next question, please.
Our next question comes from Kevin Fischbeck with Bank of America. Please go ahead. Your line is open.
The market seems to be concerned to some degree about -- I guess both maybe on the managed-care side and PBM side after these are good point-of-sale rebates or move away from rebates entirely. So, I just want to get may be a little bit more color from you about your experience so far in 2019 on the commercial risk side, on the business that you moved over? I assume that the margin profile there is similar to what it was previously, but may be just comment on that.
And then as far as the PBM side with these new contracts that you're talking about post-2020, I assume that the economics in that business is also similar to your core business, so may be just confirm those two points.
Yes, Kevin I think the most compelling part of point-of-sale rebate application and the commercial markets for UnitedHealthcare and I'll have Dan comment on this in a moment as well, but is the fact that per eligible script, we're serving consumers a $130 per script. And we're seeing adherence rates as high as -- improvements as much as 16%.
So, the impact on society and the people we serve is probably the most compelling part that I want to remain unnoticed. I think as it relates to the financial effects of it is fairly much -- pretty much in line with what are expectations were overall, but Dan do you have any additional comments?
That's right Dave. Our expectations on the outcomes for very much in keeping with what we thought going on. And the reality is, it's very meaningful impact for the individuals that are taking high-cost specialty medications that Dave mentioned and they are very compelling savings for them. But when you look at it the overall medical and pharmacy offering, it's a more modest impact.
And overall it was a modest impact in part because there is that perception that the people are deeply exposed to price inflation and pharmacy and the reality is that most the plan designed that exist in the market today still have significant price protections in place like a pharmacy co-pay as an example. John you want to broaden that up for OptumRx?
Yes sure. Maybe to set the overall point was just the driving the plan for rebates does not impact our bottom-line or our economics. This is around driving solutions that drive affordability to the consumers we serve and that's why we're doing it. This is making sure that the value that we extract from the market actually goes to the consumers and so I think that's the core element on it.
We do believe that it's important to have mechanisms like a discount that we negotiated with pharma manufacturers in order to control cost in outer years. So, I think that's also left in the discussion is that there needs to be mechanisms that check against the price increases in the future years.
Next question comes from Sarah James with Piper Jaffray. Please go ahead. Your line is open.
I was hoping that you could update us on some of the growth initiatives for OptumCare. Thinking about recent comments that you've made about may be that business growing to multiples of the size that it is, then growing from 30 markets to 75. How should we think about the mix of products that you want to target during that growth and the pacing if it would be ratable growth over time or if it's going to come in larger chunk due to our focus on M&A. Thanks.
Andrew Witty?
Yes, Sarah thanks very much. Andrew Witty. In a second I'm just going to hand over to Dr. Wyatt Decker. It's good opportunity for me to introduce to you. He's just joined us from the senior leadership at Mayo Clinic Network in Arizona. And he's taken over as the leader of our OptumHealth business. Andrew Hayek is also here today, who is now working alongside me directly in identifying and building some of the new growth platforms we anticipate within the OptumHealth portfolio.
And that really speaks to - and let me just make it very specific comments to your questions there. We see a wide range of growth opportunities within the OptumHealth portfolio and with the OptumCare's portfolio specifically that really ranges from building out the debt in the major cities and conventions where we already have presence. And you'll see continued efforts to fill in those networks and to develop, essentially a coordinated network of care delivery in those cities.
That's something, which you should expect to see on relentless ongoing basis. But, of course, we will also be looking at further extension of that network across the country through acquisition and elsewhere. And, obviously, when the DMG deal closes that will be a significant expansion of that in that very, very direct way.
As literally quarter-by-quarter, I think we see more and more potential for the ambulatory network that we're building across the OptumCare portfolio. As I mentioned in my prepared remarks, the opening of our first cancer care center in Las Vegas this quarter, I think is just signaling all the direction I’ll probably want to follow.
Let me ask Dr. Wyatt Decker, just to may be add some specific thoughts from his position. Wyatt?
Thank you, Andrew, and Sarah thank you for the question. It’s a pleasure to be here with you this morning, and I can't tell you how please I am to have joined UnitedHealth Group. I have confident that there is no organization that is better positioned to create the future healthcare than this one.
I would just add that OptumCare's vision for care is to create leading value-based patient centric physician health care system in the United States and we will do this through local markets where we can weave together the assets that Andrew has already touched on and we will do this through organic growth of our -- we're already in 36 markets.
And if you include our MedExpress and ambulatory surgical centers, it would be 60 markets. We have 38,000 employed in affiliate physicians, and this will continue to grow organically as well as inorganically.
But most exciting is what happens when you bring together, a value-based reimbursement system with a culture of commitment to patients and providers and layer on technology. And that's what we're committed to doing at - in OptumCare. Thank you.
Our next question comes from Josh Raskin with Nephron Research. Please go ahead. Your line is open.
Question really around just the broad risk membership segment. So commercial, Medicare, Medicaid and I know you don't typically update revenues of membership stayed with the quarters, but I guess other than the obvious Iowa exit. It is the broadly the risk membership numbers came in a little lower than we were expecting. Any changes to the outlook there by any of the segments? Or any color you can give in the individual areas?
Joshua, we typically don't update those particularly this early in the year. Steve Nelson, do you want to comment on growth overall and engage your team accordingly?
May be just a few broad comments about UnitedHealthcare overall and how we think about growth? As you know we start with really strong market positions across all the businesses that you mentioned and have a history of the growth in those positions. And as I mentioned earlier in my comments that, that we're going to add over a million medical members this year and so great growth track record.
Such as we look forward, our intention and our ambition is to continue to grow, grow those positions particularly as we think about some of the really strategic segments such as Medicare Advantage and build Special Needs Plans, where we have invested in capabilities and really strengthen our product offerings and some really innovative collaborations with Optum as well to really position ourselves to grow there not only this year, but continue to grow share as we look forward.
Having said that, as you look across all the risks of different businesses, we are looking for long-term sustainable growth and so we do remain disciplined in our pricing and we're very intentional about where we grow and how we grow. And then that really just - I'll just end by saying that the path for growth for us is continued is a continued to focus on value and the products that we offer need to be innovative, they need to be directed towards, where the consumer needs our help. We are very adamant about driving a better experience, while we lower the cost and improve the outcomes.
So we continue to be really bullish and optimistic about our growth opportunities, but we're going to be really thoughtful about it, and maybe I'd ask Dan to talk a little bit more about how that commercial for insured and some of the progress we’re seeing there.
As it relates to the commercial risk based enrollment, we had expected declines in the first quarter and that was largely driven by two public sector clients, and so similar to the enrollment pattern we experienced last year. We do expect to grow over the remaining quarters of the year. And inside the results, I'll tell you, we are growing in some markets and segments that are very important to us.
And as Steve mentioned, we are very focused on increasing the value of our offerings. And we do that through a combination of some of the innovations you heard of earlier, deeper collaborations with high performing care providers, OptumCare as well as others, and also contributions from our multi-year multibillion dollar cost effort.
So we feel well positioned. And then I'd also be remiss if I didn't mention that, we're pleased with the results that we've driven on the self-funded side. We've had a very focused effort to return to growth and we did that nicely in the first quarter. We grew strongly on an organic basis, and we also supplemented that with some nice M&A as well. So overall, well positioned and feel good about it.
Our next question is from Gary Taylor with JPMorgan. Please go ahead.
I want to delve into the MLR just a little bit and see if I could maybe roughly just tie out some numbers. So, MLR up about 60 basis points year-over-year, I think given the comments you made last – a year ago quarter about flu contributing about 50 basis points, it looks like MLR is maybe up 110 very in line with your guidance for the full year. But it still looks better than what we would estimate health insurance fee might push that number up roughly 140, and then government growing faster than commercial might be another 25 bps or so. So it still looks like, if I'm right, kind of an adjusted up 110 is still improving the real underlying trend primarily excluding the HIF. And I just wanted to see if those numbers sort of ballpark? And if so, where are you seeing sort of the true underlying improvement?
Thanks, Gary. John Rex.
Yes. Thanks, Gary. Good morning. So I'd start with the medical care ratio in the quarter it was in line with our expectations for the 1Q. I think you're correct in terms of the things you're seeing across that in terms of some of your observations that would create movement and such. I would point out in the 1Q one of the comments we made last quarter was around the workday content of 1Q 2019 versus 1Q 2018 having some impact which is one of the reasons we wanted to create some awareness around that.
And that's just being calendar's fairly stable over the course of the year, but there are differences in quarters. And so when you have that content sometimes we would point that out. So we had one fewer weak day in the 1Q 2019 than 1Q 2018. The opposite affect occur is in 3Q this year. Actually, we have one more day in the 3Q 2019 than 3Q 2018.
So no annual impact, it's just the quarterly timing how it flows across the year. So 1Q benefit 3Q gets that offsetting the weak day content that's where you expected this fall. That's really a…
One clarification if I could. Since there's not much Medicaid growth this year which is usually much higher MLR is the MA enrollment growth, is that really any material effect on MLR in the guidance for the year?
No, I wouldn't call it material.
We will take our next question from Scott Fidel with Stephens. Please go ahead. Your line is open.
Just interested in your early thoughts on the Medicare outlook now for 2020 in terms of sustaining sort of the MA growth profile, now that we have the final rates visibility and sort of assuming that the HIF comes back next year. So maybe sort of thinking about sort of how you view the right outlook at this point on a net basis for 2020 an individual MA. And then maybe an update on how the group MA pipeline is shaping up for 2020 as well?
Brian Thompson.
Sure. Thanks for the question Scott. First off, we're pleased with our growth year for the first quarter in 2019 and our positioning. As we have said before, we looked at 2019 because of long term view expecting for the potential headwind that return of the tax in 2020. As we're seeing the rates now, we're encouraged by the rate improvement that we've seen since the advanced notice, up about a point, but still not enough to cover the expected return of the health insurance tax. And I think that'll be pressure point industry wide.
But what I can say to UnitedHealthcare in particular is that like I said, we went to market in 2019 with a long term view and expectant of this headwind. We're thoughtful and disciplined and intend to approach 2020 with the goal of keeping our benefits and our margins as stable as possible despite these headwinds.
While at the same time driving continued growth like we have demonstrated now over the course of the last five to six years and improving our operating earnings overall. That's been the formula that we've executed against successfully and intend to do so again here in 2020. So optimistic about the outlook and are positioning here ending the first quarter 2019.
Our next question comes from Steve Tanal with Goldman Sachs. Your line is open. Please go ahead.
You covered a lot of ground, maybe just one on the business combination announced today, if you could give us any color on that, maybe the revenue and earnings impact for the quarter and the year and whether that was contemplated in the prior 2019 guidance? That'll be helpful. Thank you.
It's a very small acquisition, Steve, it's of an ASO based business or a self-funded business, about 630,000 lives, if I recall correctly. Relatively small purchase price, nice tuck-in acquisition, brings us a few new capabilities and technologies. But quite pleased to align with this company, but relatively small. And not really influencing our earnings expectations for the year.
Next question comes from A.J. Rice with Credit Suisse. Please go ahead. Your line is open.
I just thought I'd ask about the PBM selling season for 2020. I assume we're well into that now. I think Andrew's comments about some early successes may be flush that out. I guess, there's two aspects to it I'd ask you about. You got more people that seem to be trying to pitch the synchronization strategies you guys have been doing for a while, is that changing the dynamics of the selling season in anyway? And then, I know a few years ago, the Health Transformation Alliance was a big discussion point. Those contracts sound like some of them may now be coming up for renewal. Does that present any challenges or opportunities for you?
Andrew?
Just before I ask John to comment more specifically about 2020. I think what we are seeing is, some of the benefits of a very substantial amount of innovation around our offering design that John and his team have been developing, partly in anticipation of changes in the policy environment that obviously been touched on already in this call conversation, but also taking advantage of technology and other levers that have been brought alongside the traditional core PBM of OptumRx.
I think it's that combination of all of those things, really, leaning into exploring value-based propositions and really being extremely dynamic in the way in which we start to bring to bear some of these different tools that has created a very competitive set of offerings. Let me ask John just to describe you how that's landing for us this year and projected for next year.
Jay, it's John Prince. In terms of our 2020 selling season it is still early, but we have a very healthy pipeline of opportunities. We've already had some really good wins for 2020. We've sold several large health plans. They stayed in a variety of large employers.
Two good examples that -- of large wins already was the Hubbard program announcement and of our partnership in early January. They selected us because of our partnership around total cost of care, clinical outcomes, consumer experience sort of resonating, what Andrew Witty just mentioned, around our innovation around the consumer and clinical outcomes.
Another example of a good win for 2020 is, with HealthTrust and their division for CoreTrust, they selected OptumRx as their exclusive pharmacy care services provider to improve the performance of healthcare. We'll be their key strategic channel partner for health systems in Fortune 2000 companies.
In the overall market, you asked around, our value story, I think, our value proposition is resonating their market. Others might be now using the same vocabulary as we have, but we've been working at this for five years. We continue to modernize our offering, continue to innovate around outcomes and also we continued to expand the services that we have to support unique communities and partnerships. And I think that's also a differentiation for us in the market. Thank you.
It's a great question. What you're seeing there is a innovation and play, starting with synchronization, but really the development of a modern, much more modern pharmacy care services business that continues to stay out of the marketplace and is really responding to the needs of employers, health plans, and others out there and seeing the growth as a result.
Our next question comes from Ana Gupte with SVB Leerink. Please go ahead. Your line is open.
My question was about Telehealth, I think I saw a sort of national TV ads on Virtual Health UnitedHealthcare. I was wondering if you could comment on what your strategy is, is this mostly for urgent care or is it also belongs to panic care management. So, is that differ by pair mix and how are you preparing for the CMS inclusion of the Telehealth in the bundle and then can you talk about how this dovetails with your OptumCare strategy of MedExpress and employed physicians -- thinking any single vendor or multi-vendor contracts or anything?
Thank you, Ana. Andrew?
Yes. Ana thanks so much for the question. So, I think Telehealth is an interesting potential ingredient for how we think about delivering improved outcome and value for patients and customers within our OptumCare's environment.
But I think really the central -- so, I think the really central part is to ensure that we have a really, really strong integrated physical engagement with patients as a core platform. That needs to be very much empowered by information, clinical insight, and needs to be real-time. So, that's very much with we are building.
I think then wrapped around that, we envision substantial portfolios of digital engagement and also platform such as Telehealth. But I think on their own, they have relatively limited runway, frankly. I think as a component or as an ingredient of a much more comprehensive care delivery platform, which is what we envisioned, clearly a role, but very much alongside what you're seeing has developed within the OptumCare's environment, very much patient-centric, very much focused on the best possible clinical outcome, focused on the best possible patient experience at the lowest possible cost.
We think that is a strategy, which will require modern technologies, innovative technologies like Telehealth, but it fundamentally will be built around the physician-led physical engagement of the patient.
Our next question comes from Lance Wilkes with Sanford Bernstein. Please go ahead. Your line is open.
Yes, just had a question on medical cost trend and just general kind of medical cost performance for the first quarter. Can you just talk a little about how it's tracking to the guidance you guys have given? And in particular, are you seeing better than expected results on the pharmacy side as well as anything else offsetting that?
I assume you're referring to commercial Lance?
Yes, I was thinking about your commercial medical cost trend target of 6%.
Dan?
Sure, good morning Lance. I would tell you that our medical cost in the quarter were very much in line with our expectation and on track as we look to the full year. That's 6% plus or minus 50 basis points. Frankly, I wouldn't call out anything as being different than what we had expected coming in.
Our next question comes from John Ransom with Raymond James. Please go ahead. Your line is open.
We attempted to kill some trees last week and tease out some of the organic growth numbers from the acquired growth. The number that was astounding to me at least was that we calculated the mid-teens organic growth at OptumHealth, which as you know would be 3x the organic growth of any kind of stand-alone services providers that's track publicly. So I was wondering, if you could just give us some help as to how you get to those numbers that are frankly 3x anything else we see out there in the stand-alone market? Thanks.
It's compelling growth platform. And it's doing exactly what we had hoped and designed it to do. Andrew?
Yes, I mean listen, John thanks so much for the question. I think what you'll see within OptumHealth is really a whole series of self reinforcing very complementary growth drivers all beginning to kick in together. And I think the leadership team, Andrew Hayek's leadership team now led by Dr. Wyatt Decker, I think deserve a lot of credit for bringing on stream all of these various activities.
As you look across, you're seeing geographic growth; we're seeing a greater shift of physician groups to value. We're seeing those physician groups deliver great quality of clinical care, a better cost. That -- making those practices more attractive for membership clearly. And as you think through, you can layer on level after level and each of them kind of amplify the growth velocity of the business.
So we feel very good about the track record that this business is the delivering. Honestly, I think it was still in the very early days of the evolution of the OptumHealth and OptumCare's business you’ll see substantial degrees of innovation over the next year or two. We've got significant ambitions for layer in on and developing the Rally platform for example alongside the OptumCare platform.
And as you heard in the prepared remarks, things like the OptumCare cancer center begins to open up yet another dimension and the work that Andrew Hayek is now leading alongside me directly to look at further expansion points for the OptumHealth, OptumCare's agenda. So early days, we feel good about where we are so far. Very clearly a function of many streams of work beginning to gear together very positively.
Yes. Just expect us to continue to invest in this category and we're talking five to 10 years out to build this health system that has the capacity to make a real difference on outcomes quality and patient experience and costs frankly, delivering really strong…
If you can permit me a follow-up. How much of it is the move where the primary care doctor goes from getting $0.05, $0.10 on $1 to getting the full dollar. Is that bigger than a mousetrap in terms of the overall growth? Or is that just a small piece of it?
John, a key part. I mean, as you know a key part of the philosophy of how we’re developing OptumCare is exactly that journey and we believe that's very important. We see repeatedly that that helps facilitate and free up physicians to make great decisions on behalf of their patients, ensure the best care is delivered with the best possible cost.
So yes that's a key part of the journey, and it's certainly a part of philosophy of how we run that set of clinics, yes.
We'll take our next question from Charles Rhyee with Cowen. Please go ahead. Your line is open.
I just want to get a clarification, Dave because there's some headline that came across regarding your commentary about the Medicaid business. I recall hearing earlier you saying that, you expect to get your target margins by 2020, but headlines are coming across saying probably take us 2022. Can you just clarify what you had said earlier?
Our expectation is that we'll be in the zone of our target margins probably closer to the bottom end of that in 2020.
And my question was actually, if I could ask my question around points of rebates. You guys had mentioned not just you, but all the PBM's in general that point-of-sale rebates have been available to the employer market for some time – it just wasn't really an appetite for it. You guys are now making decision to move ahead in the commercial market with this kind of strategy. Does this put you at risk here that employers aren’t going to be still that attracted to this type of model as you move forward?
Yes. It's possible that that would be the case. But for situations where consumers are exposed to high inflation or list prices of drugs, we think it's important that discounts are applied at the point of service. And so we believe that that's the proper plan design. Again, where there is a high-deductible health plan or there is other benefit designs that we've patients exposed.
So, again, we're seeing as much as a 16% improvement and adherence. And we believe the long-term health effects for the people we serve will be substantial as a result. So we think we're doing the right thing for people and if that means, we have to offer designs that are more restrictive we will. Next question please.
Next question comes from Zach Sopcak with Morgan Stanley. Please go ahead. Your line is open.
To that last point do you think the adherence by the Fed and improvement in cost that you're seeing in your commercial book is translatable to Medicare? Or do you think you would get more leverage just given a general sicker population?
Theoretically, yes, we believe so. We'd like to see it prove out over time, but we'd probably expect the benefits in the Medicare population to be more immediate than you might see in a – in a commercial population. Thanks for the question. Next question please.
Our next question comes from Steve Willoughby with Cleveland Research. Please go ahead. Your line is open.
Just one point of clarification and then a question. The point of clarification just on 2020 selling season comments, is there any way to quantify where you're thinking your positioning might be in terms of a net basis going in for next year on the PBM business? And then my question was just on Duals and if you could just provide a little bit more color on the importance of Duals to your growth, what you're seeing so far this year and where you expect that to go over the rest of this year and next year? Thank you.
Yes. Steve, we're not going to comment on 2020 at this stage. But we can answer the Duals question. Heather?
Sure. The Duals, you mean, the Duals special needs program as you know UnitedHealthcare has been in this space and growing and growing strong results over 30% of the market today. But we really invest in the Duals special needs program is because we see that it's really the best for our consumers. It’s the aligned benefits, care coordination that our members cannot get from Medicaid or Medicare alone, and often they get supplemental benefits on top of that.
So as we continue to see alignment with states and the federal government to make this program even better. It's a place we're going to continue to invest. We had another strong year in 2018 as you know the quarter, first quarter we saw strong growth in this again, and we think that's really our experience. Our Medicaid footprint our unique programs through Optum like our HouseCalls program and our strong brand and service surgical specialty. So this will be an area see us continue to invest and we expect a strong growth again this year in 2019.
We'll take our question from Michael Newshel with Evercore ISI. Please go ahead. Your line is open.
Also quickly on the tax rate. It was close to the full-year guidance, but in the past, the first quarter has been lower due to stock comp expense timing. So is there any change in seasonality this year or any change to expectations for the full-year tax rate?
John?
It's John Rex. No change in our full year outlook I would say in terms of the 1Q. And there was a little reduced impact from a share based exercise benefit, as you realize that has impact that typically why the 1Q trends lower than other quarters, because there's more activity there. And there was just the volume of exercise that was just a little bit lighter and that's probably likely due to share price fluctuation but that was it.
Thank you, Michael. Are there any questions remaining?
We have one question remaining on the line.
Okay.
From Matthew Borsch with BMO. Please go ahead. Your line is open.
I'll make this quick you've been very, very patient going through all the questions. Just curious to ask at this stage of the game, are you concerned that you'll be loading a lot on price going into 2020? And clearly the industry fee assuming that comes back is going to be something that was out of pricing that's going to come back into pricing in 2020. But you've also got maybe something to add on to pricing with the PBM change or maybe not take to your pricing, but the employers do effectively if they're not using the rebate to reduce employee side premiums. Is that going to be a factor as you're going into next year?
Matt. Good question. I think as you know we're already have converted or we're in process of converting the $8 million fully-insured commercialize to move to point-of-sale rebates, so that consideration has already played out for the most part overall.
I think Brian talked earlier about how he has positioned a multi-year strategy and very important commentary from him about maintaining benefits stability and maintaining margins through the 2020 time period here recognizing that there is some friction on rising cost structures overall.
And I don't really see a meaningful impact on our self-funded market either from the modification that we've made on point-of-sale announced earlier this year. The thing I am concerned about is the return of the health insurance tax in 2020. That will increase the cost to health care by at least $20 billion for 142 million people.
And if you do the math on that that increased premiums for a senior couple by $500 dollars and for families with small business coverage by about the same amount. And that outcome from our standpoint is entirely unacceptable.
The healthcare already costs too much in these unnecessary taxes layered on top of what is already in high-cost health system is just untenable. So we continue to pursue a deferral, if not an outright repeal on behalf of those we serve. We can't comment on or speculate on the outcome at this stage where we're operating as if the law is the law. And that there is no deferral, but we certainly hope and will continue to advocate aggressively on behalf of the consumers we serve to keep these healthcare costs in check.
There are no further questions in the queue.
Okay, great. Well, thank you. To sum up our discussion today UnitedHealth Group began 2019 with strong operational and financial performance from both the Optum and UnitedHealthcare. We achieved this robust performance by increasing the healthcare value we deliver to people every day, providing more affordable higher quality healthcare, while improving patient and care provider satisfaction.
As an innovative technology enabled healthcare company, the value we offer society is rising at an accelerating pace. In turn, we expect to continue to grow, serving more people in more ways across the U.S. and worldwide. Thank you for joining us. This concludes our call.
This does conclude today's program. Thank you for your participation and you may now disconnect.