Good morning, welcome to UnitedHealth Group's second quarter 2020 earnings conference call. A question and answer session will follow UnitedHealth Group's prepared remarks. As a reminder, this call is being recorded. Here is some important introductory information. This call contains forward-looking statements under U.S. federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations. A description of some of the risks and uncertainties can be found in the reports that we file with the Securities and Exchange Commission, including the cautionary statements included in our current and periodic filings. This call will also reference non-GAAP amounts. A reconciliation of the non-GAAP to GAAP amounts is available on the Financial and Earnings Reports section of the company's investor relations page at unitedhealthgroup.com.
Information presented on this call is contained in the earnings release we issued this morning and in our Form 8-K, dated July 15th, 2020, 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, Mr. David Wichmann. Please go ahead.
Good morning, thank you for joining us. When we last met in this forum 90 days ago, the challenges of COVID-19 in the Americas were just beginning to emerge. Now, some four months into the evolving pandemic, the individual health system, social, and economic implications of the virus are significant, especially the impact of longstanding health disparities affecting the underserved populations hit hardest by the pandemic. In uncharted periods such as these, we lean on our mission. Yes. That mission and those values call on us to help people, to help health systems, to help everyone with integrity, compassion, innovation, relationships, and performance.
I am grateful to and proud of our 325,000 diverse team members as they continue to provide vital support, caring for those we serve and working with the health system partners to combat this disease and the many other daily health challenges that have not gone away. They've just been deferred and possibly become more complicated. We deeply appreciate the tireless service of our 120,000 doctors, nurses, medical and behavioral professionals, social workers, pharmacists, and other healthcare workers on the front lines of care. They serve in Brazil, Chile, Colombia, Peru, and Portugal. They serve in New York City, Seattle, Southern California, Phoenix, Texas, Florida, and other communities confronted by COVID-19. Their compassion for our patients and members has saved lives and helped make the lives of countless other people better.
UnitedHealth Group was built to be adaptable, an instinctive enterprise capable of anticipating change, rapidly evolving, and reconfiguring capabilities to meet both challenges and opportunities. The past several months have only highlighted the importance of this agility, so long core to how we operate, and deepened our resolve to cultivate it. We've witnessed our people helping in ways and advancing innovations and solutions at an unprecedented pace, scope, and scale. Today, I'd like to provide insights into how our business is both responding and advancing, share what we've learned in the past several months, describe how these lessons enhance our ability to serve even more people more deeply, and as a result, we expect to grow and emerge stronger in the years to come. UnitedHealthcare and Optum have both experienced the effects of an unprecedented decline in healthcare services.
Among early actions we undertook to help people were opening new enrollment periods so more people could be covered, waiving all consumer COVID-19 diagnostic and treatment costs, accelerating $2 billion in needed funding to care providers, and providing over $1.5 billion in direct consumer and customer assistance, including premium forgiveness and suspension of member cost-sharing to help people manage their health conditions. These amounts are in addition to the $1 billion in estimated rebates to be paid in coming periods. Throughout this pandemic, we have taken extraordinary measures to ensure people get the essential care they need. As we speak with you today, care access patterns are nearing more normal levels, an encouraging sign for people's health. We see the system operating just short of its normal baseline now, far above the lows experienced as the second quarter began.
We currently expect care access patterns, while somewhat more volatile than in the past, to moderately exceed normal baselines in the second half as people seek previously deferred care. A pandemic with high testing and treatment costs per affected consumer is expected to continue to run its course throughout 2020 and into 2021. Consistent with the proactive actions we've already undertaken, we will continue to act swiftly to address any further financial imbalances arising from the pandemic and related effects. We are further advancing broad health equity initiatives, tapping into our data, information, and analytics capacities to guide scientific efforts to help eliminate longstanding health disparities.
This is a course we have pursued for many years and are now even more intentional as we see underserved populations disproportionately impacted by this health crisis. We established an innovative community-based care model to provide COVID-19 testing, education, and other necessary services to some of the highest risk and least served communities in the country. We are focusing on locations with high mortality, along with local community challenges, including poverty, crowding, food insecurity, homelessness, and other existing social determinants of health. Our service includes special deployments in the underserved communities of Philadelphia, Los Angeles, and Orleans Parish, alongside many other similar communities we serve through our core Medicare and Medicaid programs. We are researching new treatment approaches in partnership with prominent academic institutions.
For example, working with the Morehouse School of Medicine, we're studying the effect of COVID-19 on those with sickle cell trait, a condition which is prevalent in 8%-10% of Black Americans. We're conducting an ACE inhibitor virtual clinical trial with the Yale School of Medicine. Artificial intelligence applied to our data show that seniors on ACE inhibitors who test positive for COVID-19 are 40% less likely to need hospitalizations than those who are not. Understanding that there's a significant racial disparity in the use of ACE inhibitors to manage hypertension, we're working rapidly to scale this 10,000-person virtual clinical trial, believed to be the first of its type. We're partnering with a growing number of state governments and employers who are using Optum's rapid response resources to stand up mobile and fixed testing sites.
To date, we have helped conduct more than a half a million tests across more than 500 sites, most often in rural and underserved communities. We committed another $100 million in affordable housing to address homelessness, bringing our total investments to more than $500 million to build nearly 5,400 units over the past seven years. We will do more, focused on working with others to eradicate longstanding health disparities in America and to create a more diverse U.S. health workforce. The COVID-19 crisis has accelerated the adoption of new technologies and approaches to care. We're serving people where they want to be served, and more often in the home, which is becoming a preferred additional care setting through new innovative digital offerings. At peak care system closure in April, UnitedHealthcare facilitated more than 4 million digital care visits.
That's nearly 30 times the number of visits we enabled in January. We expect digital and home care to persist and expand in coming years. We are rapidly assembling our next generation comprehensive platform, leveraging the digital signaling and monitor capacities of Vivify, the market leading engagement capabilities of Rally, our AI-enabled individual health record, the pharmacy e-commerce capabilities of Optum Rx, our extensive hands-on community-based clinical resources, and importantly, a proprietary, scalable, direct-to-your-own doctor telemedicine platform. The understandable and expected rise in stress, anxiety, and social isolation has increased the demand for behavioral health services. Digital platforms are proving to be increasingly effective in remotely diagnosing and caring for people with such needs at a rapidly expanding scope. Optum is among the largest providers of digital behavioral health care services in the country, now with more than 10,000 care providers using our virtual visit platform.
Our digital psychiatry offerings extend to community behavioral health clinics, enabling hundreds of thousands of digital visits and complements our more than 500 community-based behavioral health pharmacies. Optum nurses are meeting the increasing need for infusion services in the comfort and safety of people's homes. A double-digit trend we expect will accelerate for years to come. Home infusion visits by our nurses offer fully equivalent clinical efficacy, greater patient convenience and satisfaction, and reduced risk of immunocompromised people at up to one half the cost of traditional settings. Our house call services include extensive digital clinical care visits, supplementing in-home visits by Optum nurses. As clinical techniques and technologies advance, ambulatory surgical care is expanding as an appropriate care setting for high acuity members and procedures like cardiovascular surgeries.
Partly as a result of the COVID-19 disruptions, the convenience, safety, and better patient and surgeon experience is becoming more deeply understood. For example, in just the last two months, we welcomed several hundred new surgeons to our centers and have opened new and higher acuity service lines. We expect the alignment of physicians to value-based care models to accelerate. The recent months have served as a compelling example of why care delivery has and should continue to advance in this direction. Optum Care continues as the physician partner of choice with over 6,500 additional clinicians, primarily PCPs, specialists, nurse practitioners, and physician assistants, added so far this year. These clinicians are seeking alignment with the entity best equipped to help move to high performing and more stable accountable care models. We believe that entity is Optum Care.
These are a few examples of how we have and continue to innovate to help make people healthier, to help make health systems work better for everyone. The information and technology-enabled ambulatory care and pharmacy capacities of Optum leveraged and deployed by UnitedHealthcare and other payers and other health systems, holds significant promise for the future of the U.S. health system. I'll turn it over to Financial Officer John Rex.
Thank you, Dave. As expected, our second quarter earnings were meaningfully impacted by unprecedented and far-reaching disruption in care patterns. We expect this temporary impact will be offset in the quarters ahead by the proactive assistance measures we have already taken, the resumption of more normal care patterns, and future COVID-19 impacts, both within the healthcare sector and the economy at large. Looking more specifically at the pandemic effects in the second quarter, Optum revenue and earnings for fee-for-service care delivery and the Optum Insight and Optum Rx volume-based businesses were reduced by lower level of care encounters. For the company as a whole, this was more than offset by the disrupted care patterns within the UnitedHealthcare and the Optum Health risk-based businesses.
Prior period development of $1.4 billion arose primarily from the lower than expected care levels in the second half of March, contributing to the lower medical care ratio this quarter. The impact of this care disruption is reduced by factors such as COVID-related treatment and testing and the financial assistance we are providing. Notably, the assistance component has a more pronounced financial impact in future periods. For example, the suspension of member cost share will have an accelerating benefit and corresponding impact for the people we serve as care delivery systems further reopen and they seek care again. At the lowest point in April, inpatient care, inclusive of COVID-19 related care, was about three-quarters of baseline. In June, this recovered to nearly 95%. At the same low point, outpatient and physician services fell to roughly 60% of normal levels. As we exited June, they were also recovering, tracking above 90%.
These national trends have continued thus far in July. Even as certain states are seeing short-term deferral of services where there are elevated levels of infection and hospitalization. Turning to Optum's overall performance, each of the three businesses performed well. They were affected in different ways by care deferral and the economic downturn. Optum Health second quarter earnings increased 22% year-over-year. The impact of the lower patient visits and fee-for-service practices was mostly offset by the same temporary deferral of care effects on the risk-bearing practices. Optum Insight second quarter earnings increased 7% year-over-year. The revenue backlog grew by nearly $1 billion to $19.4 billion. Many of Optum Insight payer and care provider clients have volume-based contracts for technology and managed services. After an expected slowing of such volumes early in the second quarter due to care deferral, we're now seeing activity rebound.
We see the new business pipeline strengthening again, as evidenced by the new partnership with Boulder Community Health. Optum Rx earnings declined by 6% year-over-year in the second quarter, as script volumes were impacted by lower care activity. Unsurprisingly, given the sharp drop in primary care and specialist visits, first fills of prescriptions declined by about one-third early in the second quarter, but began to recover as the quarter progressed and have continued to do so as care activity increases. Turning to UnitedHealthcare, second quarter operating earnings were significantly higher due to the temporary care deferrals. We continue to serve more people through our public sector and senior businesses, including an increase through the second quarter of nearly 600,000 people year to date.
As expected, given the economic climate, commercial enrollment declined, albeit at lower levels than the change in unemployment might have suggested, as many employers continued benefits coverage for furloughed employees. During the second quarter, growth in sales of individual policies and Medicaid membership accelerated, the latter as states eased redetermination requirements to ensure sustainable coverage for people. We were also awarded contracts to serve Medicaid members in Kentucky in 2021, are honored to have been selected to serve the Medicaid population in Indiana, and are pleased to continue serving in Philadelphia. After a strong annual enrollment period for Medicare Advantage, the pacing of new enrollees in April and May eased as traditional in-person sales slowed. In recent weeks, sales have accelerated with the current level of Medicare Advantage enrollment activity having rebounded to pre-COVID-19 expectation levels. Our liquidity and financial position have remained strong.
Second quarter cash flows reached $10 billion, or 1.5 times net earnings. Both cash flows and days in claims payable were impacted by the swift moves we undertook to provide enhanced liquidity by accelerating payments to individual care providers and health systems. Offsetting this impact was the timing of second quarter income tax payments, which will now occur in the third quarter. As noted in our press release this morning, we are maintaining our full year earnings per share outlook in anticipation of the delivery of previously deferred and potentially even higher acuity care, as well as continued costs to address COVID-19 in the second half of the year. We are encouraged by the rapid pacing of the reopening of care delivery systems and are proactively working to help people quickly obtain the care they need.
We incorporate a second half view from the consumer, customer, and care provider assistance initiatives already undertaken. As Dave stated, for imbalances should they arise over the duration of this pandemic. With that, I'll turn it back to Dave.
Thank you, John. Today in the midst of the COVID-19 crisis, foremost on our minds is the safety of our team members and their families, and the need to continue adapting rapidly, innovating and delivering for those we serve. We know you begin to focus at this time on what will come in 2021 and beyond. At this distance, the evolution of the pandemic, when and to what extent the economy will improve are very much open questions. We expect the macroeconomic impacts of the broader unemployment and actions we have taken to assist customers and communities to continue well into next year. Helping our customers through an unexpected macro environment and the extended impact from disruptions in care has and will continue to be an area of intense focus for our business leaders and care providers.
During this period, our diversified businesses are creating unique opportunities to serve, and we don't believe these are passing trends. They bring more effective outcomes, satisfaction, and convenience for people at lower cost, a significant contribution to the next generation health system, one that operates in a socially conscious way. These are accelerating and durable trends, well supportive of our 13%-16% long-term growth objective in the years to come. Public sector and senior benefits programs, our care delivery businesses, our digital and at-home based initiatives, pharmacy care services, data and analytics, and health banking and payments platforms will continue contributing as significant growth factors long into the future. Thank you for your time today. Operator, can you please open the lines for questions?
At this time, if you'd like to ask a question, please press star and one on your touchtone phone. You may remove yourself from the queue by pressing the pound key. We do ask that you limit yourself to one question. If you ask multiple questions, we will only be answering the first question so we can respond to everyone in the queue this morning. Thank you. We'll go first to Justin Lake with Wolfe Research. Please go ahead. Your line is open.
Thanks. Good morning. I wanted to follow up on your comments on second half medical costs. You talked about getting back to about 90% of typical in June or a little above 90%, and you're expecting north of 100% in the second half. I was hoping you could put some numbers around a few things. First, how much above normal do you expect to be in the back half of the year? How much of a headwind do you expect the patient and client give backs to be in the back half in terms of the headwind MLR or the impact to MLR? Can you talk about how you're pricing 2021 in terms of utilization? Thanks.
Okay. Well, maybe we'll start with John, and then as it relates to 2021, I'm sure you're talking about the commercial markets, and we'll have Dirk address that. Good morning, Justin.
Medicare would be great as well, Dave. Thanks.
Okay.
Hi. Good morning, John Rex here, Justin. Just a few comments here in terms of medical cost ratio and the impacts of customer assistance and how they flow through the year. Yes, you are right. Clearly, we expect higher than historically normal medical cost ratios as we move into the second quarter of the year, and that's certainly implied in our maintained guidance view. You can see as you look at it versus historical levels of a typical second half, we're running in the zone of a couple hundred basis points above what we would consider kind of historical medical cost ratios in the second half of the year. Kind of give you a little color in terms of how that flows through.
In terms of the customer assistance initiatives and how those play out, among some of the more significant customer assistance initiatives that we're taking on are the waiving of co-pays for seniors for both primary care and very importantly on the specialist component, as that's a very significant burden for seniors. Those really have much more impact as we get into the second half. From the perspective of, as care delivery systems reopen, that's when those costs will be incurred. You're incurring those costs as seniors are actually, and people are really accessing that care, and that's where the assistance component comes in. That component, which is one of the more significant components of the customer assistance initiatives we've undertaken, is really kind of more weighted to the back half of the year than the first half of the year.
Great. Thank you. As it relates to pricing, I think we'll start with Medicare with Tim Noel, and then we'll go to commercial with Brian Golden. Tim.
Morning, Justin. Tim Noel. Thanks for the question. As we talked a little bit last quarter about pricing for 2021 in Medicare, as a reminder, pre-COVID, we talked about total revenue related items roughly on par with our estimates of forward trend. We also have the permanent repeal of the health insurance tax in 2021. If you take those things all else equal, we would've expected 2021 to be a benefit investment year in Medicare Advantage. Certainly, COVID creates some challenges with diagnosis collection, given the utilization patterns that we're seeing and talking about. Also, CMS has not provided any discrete adjustments in the final notice to account for that, nor have they done anything since. Still too early to get specific on our bid offerings for 2021. Bids aren't final, nor are they public.
Again, our top priority is providing stable and reliable benefits for the members that we serve.
We feel really good about 2021 and expect to continue our multi-year momentum in Medicare Advantage. Thanks.
Thanks, Tim. I'd just add to that, I think the way this year is setting up, and I know it's relatively early, but in terms of the overall positioning, is to continue the pace of growth that we have been seeing across the individual Medicare Advantage lines. Then obviously, we're deeply focused on the group Medicare market and growth there as well. Brian Golden, do you want to handle commercial?
Sure. Yeah, thanks, Dave, and thanks for the question. We're going to continue our longstanding approach to pricing. We're disciplined, and we're pricing to our best estimate of future cost trends. We have extensively modeled the potential impact of COVID-19, including direct testing and treatment costs, potential vaccine costs, and costs that will be expected to be deferred into 2021, which includes the potential higher severity because of the deferred care and also the potential for continued depressed demand for healthcare services in some regions and states. All this is built into our forward view of medical cost trends, and we're working very closely with our customers right now and into August as we start to put out our renewals for 2021. Our clients are really expecting and appreciating consistent and stable pricing from us. Thank you.
Great. Thank you, Brian. Thank you, Justin, for your question. Next question please.
Our next question is from Joshua Raskin with Nephron Research. Please go ahead.
Hi. Thanks. Good morning. Wanted to talk a little bit about the impact on the physician side and Optum Health, Optum Care specifically, the recruitment of physicians and maybe how that's changed. I think there was an allusion in the press release to maybe an acceleration of bringing in more primary care and maybe some talk on specialty. Then can you just flesh out sort of within that, within Optum Care? The impact was a lot lower than I think we had expected. I heard John mention the risk-based entities offsetting the fee-for-service entities. Could you just give us a magnitude on that and sort of how much the UnitedHealthcare payments impact? Sort of how did Optum Care hold up so well?
Good questions, Josh. Appreciate them. We did try to lean into this a little bit in the script in terms of giving you the general impression that there's kind of movement afoot of physicians, advanced practice clinicians towards stable models that allow them to preserve their independence, practice at the top of their license, achieve the triple aim of healthcare. We've clearly seen that, and probably you can suspect, had a fair agenda around inorganic build to access new geographies. We've made a decent amount of progress on that front during this timeframe as well. I think I'll send it to Wyatt Decker here. He can talk a little bit about the value proposition of Optum Care and what people are seeking at this important time and why this model is the one that they are pursuing. Optum, or Wyatt.
Dave, thanks. Josh, thanks for the question. You're absolutely right, Dave. We have seen continued interest and growth in our Optum Care model, which has become really the nation's predominant physician-led, value-based, patient-centered ambulatory medical practice. That may sound like a mouthful, but it's really focused on doing what's right for patients, delivering care in both more convenient and lower cost settings in a value-based construct, keeping the patient at the center of everything we do. To the second question, Josh, around the performance of Optum Care, we've seen that our large geographic footprint combined with our both risk-based and fee-for-service model has created substantial resiliency in the business. As John Rex mentioned, we saw some countervailing financial performance there during the peak of the pandemic. We're now seeing very rapid recovery, in part because of our tremendous support of our frontline providers.
The other piece that I would want to underscore is our incredible gratitude to our frontline providers that have done an incredible job caring for both COVID patients and helping us effectively navigate through this complex pandemic. To your first question around ongoing recruitment of physician groups and individual physicians, your implied assumption is correct. We're seeing substantial interest in our practice model as well as in becoming part of Optum Care. This is part of a multi-year trend that we have continued to grow. As you know, we have relationships with multiple physician groups that are either affiliated or employed today, over 52,000 doctors in both categories combined. We have seen continued interest and expect that pipeline of affiliated and employed physicians to grow robustly. Thank you.
Good. Thank you, Josh. Appreciate your question. Next question please.
We'll go next to A.J. Rice with Credit Suisse. Please go ahead.
Hi, everybody. Let me just ask, a number of your business lines, commercial, large group commercial, the Optum Rx and Optum Insight are driven by large RFP activity, and I wonder, I think last time you had alluded to the fact that especially in Optum Insight, some of that RFP activity had been put on hold. Can you comment about how it's returned to normal? Is this going to end up being a normal year in those segments, or are you seeing people put off for a year making large decisions until there's some clarity around what's happening with the pandemic?
Sure. Well, why don't we give you color from a number of different angles here, A.J.? We'll start with Dirk to give you a sense of what's going on with UnitedHealthcare and their self-funded business and the RFP activity there, maybe even as it relates to some of the government programs-based business. I'm going to pivot over to John Prince, to talk about Rx, and then Robert Musslewhite to comment on the activities in the market segments of OptumInsight. Dirk?
Yeah. Thanks, Dave. A.J., hi. As I look at national accounts and I think about this selling season, what we really saw was is that we're about 60 days behind normal in terms of people kind of making decisions for 1/1/2021. As we sit here today, not all the decisions have been made. As we handicap our wins and losses, what we expect will be roughly flat to a little bit up in terms of group wins and losses for 1/1/2021. Really the tale is going to be told with respect to national accounts as to what attrition occurs throughout the remainder of the year. I think that's really it.
I would say in terms of general RFP activity, I think I would say that in national accounts-based sort of things just progressed just at a little bit slower than what we had seen previously. As it relates to Medicaid, I'll turn it over to Tim Spilker, who will just give us a quick thoughts on the RFP activity in CAID.
Yeah. Thanks, Dirk, and thanks for the question. Yeah, we're excited about the activity that we're seeing. As we mentioned earlier, both Kentucky and Indiana were really nice wins, and of course, we were thrilled to see that North Carolina finalized its Medicaid funding for a 7/1/2021 start. Understandably, as you suggested, states have delayed some of their procurement timelines. Overall, we're starting to see those pick up here over the next couple of months. We believe our value proposition is strong and well-positioned for growth, and we'll be ready for those procurements as they come through.
By the way, that was Tim Spilker. He's our new CEO of Community & State. You probably recall that Heather Cianfrocco was the former CEO. She was promoted to oversee Optum Health's health services sector, as its leader. As you might suspect, we are positioning some of our strongest leaders into the Optum Health segment, given the rapid growth expectations of that business over the next decade or so. Maybe just touch on group Medicare too. Brian Thompson, you want to touch on that?
Yeah, thanks, Dave. As we look forward, group Medicare Advantage is shaping up to be very strong here for 2021. Obviously, a lot of large customers looking for value as they go through this time, and we're really encouraged by a strong pipeline and some wins and feeling very good about next year in that space as well.
Yeah, the team's done really well in the Government Programs space around growth, and they have a substantial amount of momentum and continue to capitalize on that momentum going forward. John Prince, you want to touch on Rx?
Sure. Hey, A.J., it's John Prince. As you know, in the Optum Rx business, we're in the middle of our selling season right now. We continue to have a very healthy pipeline and are very excited about the opportunities in the market. In the first half of the year, we had some good wins, especially in the commercial market, the labor market, and the health plan market. As we pivot to the back half of the year, we're more in the smaller size opportunities. As we look to the big opportunities we're pursuing right now, most of them are for 2022 selling season. There is a robust pipeline for 2022. As you know, in the health plan business, this is the timeframe where they make those sets of decisions.
In terms of movement in the market, we're going to see less movement in 2021 selling season as we have seen in previous years. Overall, I think our retention's going to be very strong, as it has been for the last four years. We're going to be tracking to the high nineties, as we've been tracking before. We're going to see strong growth. Overall, I think our story is resonating in the market. We're seeing strong focus on client affordability, our tools around making sure members stay healthy and.
Robert Musslewhite to round it up here, really talking about both the activity with health systems who have been extremely busy, and then also with health plans.
On the provider side of the business, thanks, A.J., for the question, we have felt like while there's certainly been some disruption during the quarter in some of our smaller technology deals, on the larger deals, the pipeline continues to be strong and interest remains high. Given what's happened with health systems during the quarter, we think that these larger comprehensive partnerships will continue to be very attractive to health systems that align with us across our commitment to total cost of care reductions and affordability, patient quality, and consumer centricity. These types of partnerships, as we've seen in the past, not only help mitigate liquidity and cash flow issues in the near term, but importantly, accelerate the broader transformational clinical and structural work in the medium longer term.
In that light, we're particularly pleased to be having announced yesterday our partnership with Boulder Community Health, which is again, a comprehensive new relationship focused on multiple things, including, importantly, sharing outcomes in the clinical domain, and really see this as indicative of the broader pipeline that we see across our health system clients. Feel very good about the ability to continue to support them there. On the payer side, again, similar story. Obviously, there have been places during the quarter where we've had some impact on payers' willingness to step forward with large deals, but still feel very good about the pipeline going forward, where we're able to provide a lot of value and support to our payer partners going forward and feel good about the pipeline there in the second half of the year.
Hopefully, that was responsive. Thank you for the question. Next question, please.
Go ahead, your line's open.
Just I wanted to follow up on someone's earlier question. If we think about the additional $1 billion now looking to push out, should we think about that as a starting point for additional rebates? What's sort of the timing as we think about that, are there some states, I think, that are excluded? Since we've spoken with some experts, they suggest some states have rules that limit your ability to rebate premiums back intra-year. Can you kind of give us some thoughts around that, and how that kind of plays out?
Sure. The additional $1 billion or the $1 billion in premium rebates is a best estimate. It's a move, we continue to deal with the evolutions of the pandemic as well as the impacts on the economy that the results that you see us through. As it relates to rebates, yes, there are anti-kickback, very complex engagements that we need to make with the insurance, return these funds, and we have engaged in that and have been successful at getting concurrence with them around providing these rebates. Obviously, it's a lot easier to give money back than it is to ask for new. They've been very receptive and very collaborative and proactive as we were, and as early as we were to our commercial network on the Medicare front.
Thank you for the question. Next question, please. Next question is from Robert Jones with Goldman Sachs. Please go ahead.
Great. Thanks for the question. I guess maybe just wanted to ask on disenroll Medicaid books. It seems having an impact on commercial enrollment. I was hoping maybe you could share your thoughts on the commercial book in the back half. Relatedly, do you feel that so far you've been able to capture increased Medicaid market, particularly as we think about these furloughed employees are becoming more permanently laid off.
Sure. Yeah. Our customer base has used a lot of furloughs versus layoffs to reduce costs in the short term. In many cases, clearly this allows them to maintain medical benefits. What also has benefited our overall enrollment is the impact of the stimulus actions. That means the impact on commercial enrollment hasn't been as great as employment data just because of the stimulus as well as the furloughs. We're looking and we're continuing to work with our broker partners and with our employers to try to find other coverages for folks if they don't stay in commercial. What I would say is in the Medicaid space, what we've seen so far is that the redeterminations have been put on hold, so that's been relatively sticky.
We also will see people go to our commercial products as we have a fairly broad commercial individual products as well, so we'll be able to recapture our share. There's no doubt there's going to be sort of a delayed intake impact because of the stimulus actions. It will be a little bit more pronounced in the second half. We think we've held our own so far.
Thank you, Robert. Next question, please. Next question is from Sarah James with Piper Sandler.
Thank you. I would like to understand how you're thinking about cost shifts between 2020 and 2021. How much of the delayed utilization falls into pulled forward into 2020 from 2021? Are you making any changes in completion factor assumptions? Thanks.
Rex.
Good morning, Sarah. How are you doing? A few things, comments on the cost playout. First, point out, as you can appreciate, we're quite respectful of what we just don't know yet and is evolving. You can see that our current expectation sets up a view that as the maintained earnings outlook would imply the care that we had expected to be delivered in 2020, we look into the back half of the year. Play that way or not, or whether, as you suggest, some of that moves into 2021 also, is in part a component of how quickly health delivery systems reopen, and how fully they stay open. Also just the consumer preference in terms of their comfort of going into these settings.
All those are elements that play out respectful of that situation as we look forward on it and how that plays out in 2021. Certainly, some of that could end up in 2021 at some point, I would believe. In terms of cost, I think what you're referring to is investments that we would choose to make, and certainly we are investing heavily, and we're investing heavily in part in response to COVID-19, in response to the pandemic. You probably saw some of that even in our operating cost ratio this quarter in terms of the investments we're making on a current period basis.
To serve people and to enhance and strengthen our capabilities as we look forward. Those are the main components that I'd point out in terms of how we're acting and how we're looking ahead to serve.
Sarah, one of the things we did was we maintained our full workforce. Nobody's been laid off or furloughed or dismissed because of COVID-19, in part because we knew that on the other side of this kind of initial activity, the health system would come back online and consumers would be accessing care. We needed to make sure that we were prepared to respond to the market's demands just as quickly as possible. Because of all that, the service through this time period, we've seen a striking improvement in consumer NPS across the company, virtually all the lines of business at Optum and the same at UnitedHealthcare, and the same with Optum. We've seen a nice improvement.
We're making sure that we utilize this time well and make those investments provide the right kinds of returns so that we're creating additional trust with the marketplace. I think that's playing out nicely. Thank you for your question, Sarah. Next question, please.
Next question is from Scott Fidel with Stephens. Please go ahead.
Hi. Thanks. Good morning. I'm interested if you can talk a bit about the naviHealth deal and give us an update maybe on your broader post-acute strategy, and just in particular, interested around whether you would envision Optum moving further to continue to acquire more direct home health and provider assets or whether you would see the strategy for post-acute being more of a convener like naviHealth is right now. Thanks.
I think a little bit of both. Wyatt?
Yeah. Scott, thanks for the question. First, I would tell you how excited we are and pleased we are to welcome the team of naviHealth to Optum UnitedHealth Group. Second, I would say, just to frame it, when you look at seniors in the U.S., there's over $60 billion spend in the post-acute space, which historically has not been well managed, both in terms of the patient experience and expenses. We think there is a tremendous opportunity, and you can look forward with naviHealth as well as our own capabilities, and our colleagues at Sound Physicians, which is a hospital staffing group focused on hospitalists who are very engaged in the post-acute transition to continue to build capabilities to help both patients and people manage that post-hospitalization period with the best outcomes and the best experience.
More to come, but we're very excited about this combination of our colleagues at naviHealth.
We leaned in a lot to the digital activities and the way in which we're engaging or assembling our resources across our company to really create a unique and distinctive home clinical experience. That includes the engagement of our physical resources, so our nurses that already go into homes. I could see us very much being a home through ambulatory surgical capacity company. As it relates to the home in particular, our interest would be primarily in applying skilled health services. We would not be as inclined around the other home-based care services around ADL management and things of that nature. We probably would continue our focus on skilled clinical resources. Thanks for the question, Scott. Next question, please.
The next question is from Kevin. Please go ahead.
Great, thanks. My guess is that at this point, you're not going to give a point estimate. I just want to conceptually understand you guys about next year's earnings. This year you've done a lot to make sure that you don't capitalize on COVID, making sure that you serve the customers and the providers to make sure that you're kind of not earning more than what your guidance was going to be this year. As we think about next year, is there conceptually any reason why you wouldn't expect to be earning target margins on your different products? If we're still hitting a recession but didn't have COVID, would you expect to be hitting the same kind of margins you normally would in a scenario like that? Is there any reason to believe that next year's margins across your businesses would be somehow different than normal?
Yeah, it's really hard to tell. We normally don't give guidance at this stage, Kevin, for 2021. Sometimes we give impressions, but given the volatility of the market as it stands right now and kind of more the near-term focus that we have in making sure that we're serving our patients, members, customers, and then keeping our people safe, including our 120,000 clinical resources out on the front line of care, we're just not really in a position to talk about 2021. We'll probably give you some sense of that in the Q3 call, but maybe not quite as clear as what we may have given in the past, just kind of looking forward. I would see our investor conference as being the place where I think we can give you the best sense of things. As it relates to our core performance of our businesses, they're performing well.
We're not talking about their individual performances anymore because there's nothing normal about how any of them are performing at this stage. Collectively, they're doing a great job, and they're right on expectations, and they're right on the expectations that informed the guidance that we gave you back in December. Maybe a little bit ahead. They're performing really well. I just don't think at this time it's the right time for us to be thinking about where we could do a better job of that for you in the Q3 call later this winter. Thank you, Kevin. Next question, please.
Next question is from Ricky Goldwasser with Morgan Stanley. Please go ahead.
Yeah. Hi, good morning. As we head into the election, we're getting a lot of questions from investors around the potential public option. Can you maybe just discuss your thoughts on the dynamics of the health insurer market should a public option be instituted?
Sure. Ricky, thank you for the question. I'll just go ahead and take it. We've seen at the state level some indications of efforts around public options. I think the one that's probably most prominent is the one that occurred in the state of Washington, which ended up being an augmentation of their exchange, a set of product offerings on that. You probably have noticed that we bid, and we were one of the successful bidders, and are currently in contract negotiations to provide an offering on that exchange. What's interesting about that is, from our standpoint is that we have a very strong relationship with the state of Washington. We have significant care delivery capacities in that state, and we serve 220,000 Medicaid and over 40,000 dually eligible individuals as well.
There's a kind of a unique program design there that really uses, I'll call it roughly, a reference-based pricing. We're curious to see how we perform in competing on a reference-based pricing basis, because it's not unusual for us to have a disadvantage on discounts against a local market player, given the size and significance of those players in the overall market. We actually think this will be a nice test to see what the competitiveness of. Generally speaking, we're not a strong supporter of these public option proposals, and primarily because they disrupt current coverage platforms, which consumers value and appreciate. Coverage system already in America today. It's obviously not complete and it has some gaps.
We believe those gaps can be closed and think that consumers much prefer that we leverage the existing commercial Medicare and Medicaid markets to provide the types of coverage options and coverages that are necessary for America. The areas that likely need some tuning would be around Medicaid, and we're obviously strong supporters of the states that have not expanded to expand. We believe Medicaid is a strong coverage option for these states and encourage that that occurs. The other area would be that we see a lot of the uninsured are actually folks that have an affordable coverage option available to them, but they don't necessarily enroll, and particularly in Medicaid, excuse me, where there's about 8.5 million people that are currently uninsured but have a Medicaid option available to them.
We'd be strong proponents of passive enrollment as well to ensure that Americans are getting the coverages that are made available to them by states, federal government, and the private insurance system. With that, thank you for the question, Ricky. Next question please.
Go next to Steven Valiquette with Barclays. Please go ahead.
Thanks. Good morning, everyone. Thanks for taking the question. I guess just doing some quick back of the envelope type math. For the full year EPS guidance to remain intact, it seems that the MLR in the back half of 2020 would have to be maybe somewhere in the 86% range, give or take. I guess really my question is, just given the trends that you're seeing in June and July around utilization, I guess I'm curious whether you're generally assuming that the MLRs will be fairly consistent in both the third quarter and fourth quarter, or would you perhaps see more of your proactive spending gravitate more towards the fourth quarter when thinking about the mechanics of this for the back half? Thanks.
Good morning, Steven. Yeah, a few impacts going on as we think about kind of the progression. Definitely there are the proactive actions that we're taking to help people that have impact in the quarters here. Typically, we would think about there still being a ramp, though, in terms of the system reopening. Right? As we exited June, and we were trying to give you kind of as much clarity and transparency as we could in terms of what we're seeing real time, seeing systems reopening, that at this point, they're still not fully open. They're getting close. They're near normal, but not what we'd call fully reopened. That will continue to track over the course of the second half. We would continue that. I expect there will be some trajectory that would go on just from that component as those reopen.
Creating some offset in that, certainly we have a lot of actions also that will impact in the near term as they come on, and seniors are able to access care and move through using the co-pay eliminations that we put into place.
All those have quite a bit impact. At this distance, I would tell you, just given the variability, we're kind of in a zone where those impacts probably have offsetting impacts, and we kind of sit in the zone of we look for kind of the relatively consistent levels throughout it. Typically, we have more, as you get a little more impact, though, as you get into the four Q, our historical patterns would show that.
Okay. All right. I appreciate the extra color. Thanks.
Thank you, Steven. We have time for just a couple more questions. Next question, please.
We'll go next to Ralph Giacobbe with Citi. Please go ahead.
Thanks. Morning. You mentioned June returning to near normal levels. I think I heard John also say that it continued into July despite the COVID spikes. Is that correct? Why do you think that would be the case versus retrenching again? You mentioned acuity. Any help on how meaningful a driver that could be on trend in the second half, given deferral and if you've already seen that? Thanks.
Morning, Ralph. John Rex. Yes, you're accurate in terms of my commentary in the prepared comments here. The trends we're referring to are national trends. You're absolutely correct. If we were to go into pockets, into certain metro regions in the country, where you've seen some spiking in terms of infection rates and such, we're seeing impact in those particular regions. Those are very particular regions in terms of that dynamic that we're seeing. When we're talking about what we're seeing through July, it's very much at a national level in terms of impacts there. Dirk has a little-
Yeah
additional color commentary also.
I would say, we would expect the infection rates to ebb and flow based on geography. What we don't expect to see sort of a broad-based shutdown. Those places where that ebb and flow occurs, we would expect to see there's going to be some resulting economic impact. Obviously, some more markets, sort of individual markets, there'll be some abatement there. Overall, like we said on the call today, utilization's going to come back during the second half of the year.
Ralph, on your question on acuity, a little too soon to really call that one right now. When we expect individuals with chronic conditions that have missed treatments, and as they come back into the system, and coming back potentially with a higher acuity level, a little too soon to really be seeing that in the kind of current trending that we're looking at as we sit here today. Really isn't showing up yet, but we expect that to show up as the systems continue to reopen. Really importantly, consumer comfort level increases.
I mean, it's kind of hard to ignore the number of new diagnoses that dropped off. It's hard to ignore the drop-off in heart attack, stroke. You can imagine, with fear of consumers going to an ER that caused them not to access the health system. It may be speculative here, but I think the data that we see suggests that there will be some intensity in the services that people receive. We're prepared to make sure that we facilitate them receiving those services. One last question, please.
We'll take that question from George Hill with Deutsche Bank. Please go ahead.
Hey, good morning, guys. Thanks for sneaking me in at the end. I guess just to wrap it up, could you guys talk a little bit about the AbleTo acquisition, kind of how you think it fits into your primary care delivery model that you guys have constructed, your other telehealth partnerships, and the digital health initiatives? Thank you.
Yep. Wyatt, want to take it?
You bet. We're also very pleased to welcome the team from AbleTo, and as you allude, there's enormous capabilities there in providing digital health tools to those suffering from mild, moderate, and in some cases even severe behavioral and substance use disorder conditions. What you'll see is we'll leverage the capabilities of AbleTo in a more comprehensive fashion with other capabilities, including telehealth for behavioral care, which we have seen an enormous uptick in as well. Today, for behavioral health visits, over half are being provided in the outpatient setting using digital capabilities. AbleTo has very sophisticated tools that allow individuals to address their behavioral healthcare needs. We're very pleased about the partnership, and we look forward to continuing to build out both their and our capabilities.
Finally, to your point about embedded solutions in primary care, we have begun that journey. In fact, within Optum Care, you'll find a number of our practices have embraced this today. AbleTo provides more advanced capabilities to use digital tools in that setting as well. Integration. Thank you.
Yeah. And just-
Okay. Thank you
both naviHealth and AbleTo are organizations that we've aligned to in the past, so we have a history of a strong working relationship and good, strong intimate knowledge of the performance of these businesses and where their innovative capacities lie. They just have really strong management teams and do a very good job managing their respective markets. Thank you for your engagement today. This is a unique time in our history and in the history of healthcare. As you have come to expect from us, we will continue to meet this unprecedented environment with compassion and agility. UnitedHealth Group was built to be an adaptable company.
As we've seen in the past several months, you can expect the following from us: that we will continue to lean into challenges of the current environment with the full capacity of this enterprise and proactively seek ways to collaborate and partner with others. As we work together to serve society through COVID-19, we will fairly resolve any economic imbalances that may arise while we continue to lead in the development of the next-generation health system in a socially conscious way, one person, one provider, one health system at a time. With your continued support, we expect to grow and emerge an even stronger company in the years to come. Thank you. We look forward to talking with you again next quarter.
This does conclude today's program. Thanks for your participation. You may now disconnect. Have a great day.