UnitedHealth Group will offer customers $1.5 billion in reduced premiums, co-pays and other discounts and aims to target those hurt most by the economic fallout of the COVID-19 outbreak. (The Minnesota Star Tribune)

UnitedHealth Group said it will pass on $1.5 billion to customers through premium credits, waived copays and other discounts and spending in response to COVID-19.

The Minnetonka-based health care giant runs UnitedHealthcare, which is the nation's largest health insurer, and has been sizing up a membership shift out of employer coverage into state-run benefit programs as job losses ripple through the economy.

The credits are meant to help lower the cost of commercial coverage, while the elimination of certain fees for Medicare beneficiaries recognizes widespread delays in health care use, said Dirk McMahon, the UnitedHealthcare chief executive, in an interview.

"We think this is the right thing to do since many people have been deferring routine or planned care, and that's actually reducing our anticipated medical costs," McMahon said. "The better we treat our group customers and the better those premiums are over time, people would have a natural propensity to hold onto health insurance and remain in group coverage situations."

COVID-19 is driving illnesses that require medical care in significant numbers, which is creating medical costs that weren't anticipated when insurers set 2020 premiums.

Even so, the Seattle-based actuarial firm Milliman said the financial effect might be more than offset by delays in elective surgeries and procedures that were instituted across the country to conserve hospital resources for the pandemic. In a report last month, Milliman projected a net reduction in medical costs for health care payers by at least $75 billion and as much as $575 billion if the deferral and elimination of care continues through the end of 2020.

UnitedHealthcare said it will provide premium credits ranging from 5% to 20% to customers in fully insured commercial plans in June. Exact savings will vary by health plan.

The share of premiums spent on medical care is known as the medical loss ratio (MLR) and regulators require some health plans to issue customer rebates when the MLR falls below certain thresholds. To some extent, UnitedHealthcare's credits to commercial customers will fast-track those rebates.

"Now is the time people are hurting," McMahon said.

Through September, the company is waiving certain fees for people in Medicare Advantage health plans when they visit doctors. UnitedHealth also pledged "premium price stability and support" for seniors in Medicare Supplement policies.

"They're trying to keep employers and individuals in private coverage, and I hope it works," Joshua Haberman, president of the Minnesota Association of Health Underwriters, said via e-mail.

"Health insurance costs a lot when your employees are working and helping you generate revenue," he said. "Without the revenue, there are no good expenses."

UnitedHealthcare said it will accelerate funds to state Medicaid programs that hire the company to manage care for beneficiaries. The company says it also will support critical care providers and housing programs.

In a note to investors Thursday, analysts with Credit Suisse said the $1.5 billion is roughly being split in equal portions across the commercial, Medicare Advantage, Medicare Supplement and Medicaid markets. UnitedHealth Group reported net income of $3.38 billion on revenue of $64.42 billion for the first quarter ended March 31.

During a call with investors last month, McMahon said UnitedHealthcare expects a decline in commercial enrollment as businesses close and employers reduce payroll.

On Thursday, McMahon added: "There are some folks who are leaving group coverage but we're not going to go into exact quantification of that at this point in time."

Christopher Snowbeck • 612-673-4744

Twitter: @chrissnowbeck