Stephen J. Hemsley - Chief Executive Officer, President and Executive Director Jeff Alter - Chief Executive of UnitedHealthcare Employer & Individual Business Steve Nelson - Daniel Schumacher - John S. Penshorn - Senior Vice President of Capital Markets Communications and Strategy Austin Pittman - Larry C. Renfro - Executive Vice President and Chief Executive officer of Optum Dirk C. McMahon - Chief Executive Officer David S. Wichmann - President of Group Operations, Chief Financial Officer and Executive Vice President John Rex - Gail Koziara Boudreaux - Executive Vice President and Chief Executive Officer of United Healthcare

Justin Lake - JP Morgan Chase & Co, Research Division Matthew Borsch - Goldman Sachs Group Inc., Research Division Peter Heinz Costa - Wells Fargo Securities, LLC, Research Division Christine Arnold - Cowen and Company, LLC, Research Division David H. Windley - Jefferies LLC, Research Division Sarah James - Wedbush Securities Inc., Research Division Ralph Giacobbe - Crédit Suisse AG, Research Division Albert J. Rice - UBS Investment Bank, Research Division Joshua R. Raskin - Barclays Capital, Research Division Scott J. Fidel - Deutsche Bank AG, Research Division Kevin M. Fischbeck - BofA Merrill Lynch, Research Division Andrew Schenker - Morgan Stanley, Research Division Ana Gupte - Leerink Swann LLC, Research Division Carl R. McDonald - Citigroup Inc, Research Division

Good morning. I will be your conference facilitator today. Welcome to the UnitedHealth Group Third Quarter 2014 Earnings Conference Call. A question-and-answer session will follow UnitedHealth Group's prepared remarks. As a reminder, this call is being recorded. Here are some important introductory information. This call contains forward-looking statements under U.S. federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations. A description of some of the risks and uncertainties can be found in the reports that we file with the Securities and Exchange Commission, including the cautionary statements included in our current and periodic filings. Information presented on this call is contained in the earnings release we issued this morning and in our Form 8-K dated October 16, 2014, which may be accessed from the Investors page of the company's website. I would now like to turn the conference over to the President and Chief Executive Officer of UnitedHealth Group, Stephen Hemsley. Stephen J. Hemsley: Good morning, and thank you for joining us today. This morning, we will review our 2014 third quarter and 9-month financial results, results which have been consistently in line with or ahead of the outlook we shared with you nearly 1 year ago. We're seeing steady progress across our businesses, and over the next 2 years, expect our overall business performance to further strengthen and accelerate in both top and bottom line growth. Our top line performance this quarter suggests an improving environment for our offerings, combined with steady consistent execution. Revenue grew 7% year-over-year, led by growth in senior and public sector benefits and across Optum's portfolio of Health Services. Consistent execution is evident in our performance in managing medical and operating costs, successful state Medicaid expansion, moderately improving Medicare star rating, and the value clients are realizing in Optum's provider, payer and government markets, and all of this is in the face of unprecedented healthcare reform across the United States. Our third quarter revenues were $32.8 billion, and earnings per share grew 7% to $1.63 per share. UnitedHealthcare results clearly strengthened with Optum again contributing 30% of our enterprise-wide operating earnings. Operating cash flows of $3.2 billion were exceptional at twice our net income level despite remitting $1.3 billion in federal ACA taxes during this quarter. This morning, we are affirming our 2014 revenue outlook of $130 billion and raising our net earnings projection to a range of $5.60 to $5.65 per share. As always, our goal is to perform in the upper end of our range. We remain focused on executing a deliberate quality and cost agenda because improving healthcare quality and affordability is core to delivering value at both UnitedHealthcare and Optum. On any given day, we average 27,000 members in the hospital and another 14,000 at skilled nursing facilities. We have nearly 2,000 clinicians across the nation working with attending physicians to help keep our members on course for optimal medical outcomes, successful discharges and to avoid unnecessary readmissions. Optum expects to perform 1 million Medicare house calls and home visits this year to engage our members, understand their health status and needs, close gaps in care, and advance clinical care paths and services. Over the past 5 years, our commitment to affordable quality care has become ever more integrated, targeted and refined. Modern plan designs harness greater patient responsibility with online tools and consumer engagement services that help people make better choices and decisions to get the right care at the right facility for the right cost. We serve nearly 6 million people in consumer-directed health plans, up from 2.9 million people just 5 years ago, and these consumers have set aside $2.7 billion in healthcare funding through health banking and investment accounts with Optum. These consumers and those in similar consumer-centric programs are motivated to engage and make the best choices about their health and healthcare. Consumer engagement includes making quality and pricing transparency tools available right at people's fingertips, right on their smartphones. These tools tap into our Premium designation quality networks, a commercial benefits program we began in 2004 that now helps link people to nearly 120,000 network doctors, recognized for consistent superior quality and efficiency. These doctors practice in clinical areas that generate more than 80% of our consumers' medical cost experience, and the results are consistently outstanding. Our premium cardiac physicians have 28% fewer repeat procedures and a 29% lower complication rate for implantable cardiac device surgeries. Our premium orthopedic surgeon have 41% fewer repeat procedures and a 17% lower complication rate for knee surgeries. There are more examples like these, demonstrating that getting an engaged consumer to the right doctor makes a meaningful difference. Our commitment to affordability extends to the care delivery side. Value-based contracting has become foundational to UnitedHealthcare today, contracts that align care provider incentives around healthcare quality outcomes, appropriate use of services and total cost of care. Our contracts with value-based medical spend now total nearly $35 billion per year, up from less than $13 billion just 3 years ago and on the path to $65 billion by 2018, if not sooner. The modern health system is being shaped around aligned incentives, supported by transparent information and consistently high-quality clinical services. These changes are helping our nation in turn to achieve optimal evidence-based utilization and cost. We are among the leaders shaping this next-generation healthcare system with Optum working hand-in-glove with care providers in local markets, helping them improve consistency, quality and cost structures so they can preserve and grow their patient basis as their market shifts to performance-based revenues. Our progress is apparent in UnitedHealthcare's year-by-year decrease in hospitalizations per member in every major product category, including in 2014. Over the past 6 years, UnitedHealthcare has realized accumulative 26% reduction in inpatient use per Medicare member and a 16% reduction in inpatient use per commercial member while continuing to improve overall quality of care. To begin a brief but more detailed discussion of third quarter results, we'll start today with UnitedHealthcare. Third quarter revenues grew 6% year-over-year exceeding $30 billion. UnitedHealthcare earned more than $2 billion in the quarter driven by overall revenue growth and an efficient operating margin of 6.8%, even considering the growing mix toward lower margin public and senior sector customers. Third quarter was again led by Community & State, where we grew to serve 250,000 more people. We are now on course to grow by just under 1 million new Medicaid members this year. This record level of organic growth is well balanced with about 60% from health reform market expansions and 40% from established states under new programs that complement established approaches as well as natural growth within the traditional programs. And Medicare continues to be a growth contributor as we approach organic growth of 500,000 people across all products in 2014, a strong and consistent outcome in a year where we took necessary steps that caused some membership losses to position our Medicare Advantage products for future growth and to benefit seniors in the years ahead. Today, we have a more focused and aligned network, supporting Medicare Advantage, a Part D program qualified to serve low-income seniors in 97% of the markets nationally for 2015 and a rising star quality that will continue to advance. For the 2015 payment year, we expect more than 37% of our MA members to be in plans rated 4 stars or higher. We expect a similar percentage in 2016 and sharply improved performance in 2017 and '18 based on efforts launched earlier this year and establishing themselves across our markets. The open-enrollment season began yesterday. We believe our products are well positioned locally. Our sales and marketing resources are properly staged and supported, and we expect solid growth in our Medicare Advantage, our Part D and Medicare supplemental offerings in 2015. In the commercial markets, we remain focused on pricing discipline relative to cost trends, balancing margin and market positioning, all with an eye towards consistency and sustainability for both customers and consumers. The multi-quarter decline in risk-based enrollment has slowed, and the modest decrease in self-funded products were due to employment attrition. In the individual market, we remain on course to participate in nearly 2 dozen state exchanges in 2015 consistent with our original public exchange strategy. In Brazil, pricing increases reflect new baseline costs in delivering expanded mandated healthcare benefit leading to a conscious reduction in membership this year. Despite this decline, Amil's revenues were strong in the third quarter with international revenues increasing 19% year-over-year. Turning back to medical costs, our third quarter commercial care ratio was 79.1%. The consolidated care ratio was 79.7%, a decrease of 90 basis points over last year's third quarter. Earnings were strengthened by continued favorable reserve development across the business as our affordability initiatives continue to perform well. Moving to our Healthcare Services platform. Optum's third quarter included a healthy balance of growth, earnings performance and focused strategic market activity. Through the first 9 months, Optum revenues have grown 26% and earnings from operations by 24%. We believe the fourth quarter will be strong for this platform, and Optum remains on pace to contribute roughly 1/3 of UnitedHealth Group's 2014 cash flows from operations, all while investing significantly in future growth. In the third quarter, Optum's revenues grew 21% year-over-year to $12 billion. Earnings from operations grew 27% year-over-year to $865 million. Operating margins rose 1 full percentage point from second quarter and 30 basis points year-over-year to 7.2%. OptumRx led this quarter's results. Revenues grew 27%. Earnings from operations grew 65% to $326 million, and operating margins were above 4%, improving 0.5 points since the June quarter and 1 percentage point year-over-year. The market is responding to the value of synchronized pharmacy and medical benefits where OptumRx uses data, technology and an integrated service model to address the total medical experience in related costs rather than solely the pharmacy silo. We have seen a number of new opportunities with employers for 2015, and we believe we have been awarded more than our fair share of that new business. This growth is additive to the growth that flows naturally from the businesses of UnitedHealthcare each year. OptumInsight's growth was led by Optum360 revenue management and government exchange services. We continue to deliver services in the development and operation of federal and state healthcare exchanges and look forward to continuing to leverage Optum's expertise to serve our government partners in this important work. With the passing of this quarter, we have fully cycled through last October's regulatory pullback in hospital clinical compliance services. To put the magnitude of this pullback in perspective, OptumInsight's underlying operating earnings growth would have been more than 15 percentage points higher than the 6 percentage point growth we reported this quarter, which only highlights the strength and momentum of the diversified product offerings we offer in this segment, including the commercial version of our hospital clinical compliance capabilities that is gaining traction with hospitals in the market and is becoming a future growth driver. And our position as a valued service provider to hospitals further advanced with the recent acquisition of the MedSynergies organization. MedSynergies has deep expertise in revenue management for hospital-employed physicians and medical groups. Connecting MedSynergies with our Optum360 inpatient focus creates an end-to-end revenue management offering for large sophisticated integrated care delivery systems. Coupling these with Optum's clinical software, analytics and workflow tools gives us a comprehensive and market-leading solution to serve delivery systems covering both administrative and clinical domains across the full continuum of care settings. Within our Optum's analytics businesses, we expect to end the year with more than 50 million lives of longitudinal clinical data, up 50% in a year, and easily one of the largest such resources in the country, if not the largest, and it supplements our 155 million person administrative claims data repository. Increasingly, we are harnessing this sophisticated data resource for advanced analytics across multiple platforms to meet growing market needs around managing the health of populations. OptumHealth reported an 11% operating margin in the third quarter with earnings from operations up 16% year-over-year. These results were led by our Collaborative Care businesses. Today, Optum touches 2 million consumers through our Collaborative Care physicians and clinical professionals who are prominent leaders in their local markets, recognized for clinical quality. As our medical groups transition to Optum technology, we further improve their execution on behalf of the patients and payers they serve, help grow their business and generate superior financial returns. More broadly within OptumHealth, we look to meaningfully improve clinical outcomes and patient well-being across multiple settings: outpatient, within institutions and in the home. We expect Optum overall revenues to be at the upper end or perhaps above our target of $45 billion to $46 billion with earnings from operations near the upper end of our previous outlook of $3.1 billion to $3.2 billion. Optum's future growth should continue to be strong, supported by our $7.7 billion contract revenue backlog and exceptional levels of customer pipeline activity. To summarize, 2014 performance remains consistently strong through the first 9 months, particularly considering the ACA headwinds this year. Revenues have grown year-over-year by 6%. We have increased our full year net earnings outlook to a range of $5.60 to $5.65 per share, and this earnings outlook accommodates expected fourth quarter seasonality, strong Optum performance to close the year and fourth quarter investments in growth, including strong Medicare Advantage marketing and the launch of our individual products on health exchanges in 19 new states. We expect 2014 cash flows from operations will be around $8 billion, possibly more. Our growing earnings capacity this year positions us well for 2015. At this distance, I would offer that the consensus earnings estimates for next year do a pretty good job of calibrating our 2015 outlook reflecting the combination of opportunities we expect to pursue and the challenges we expect to manage. We remain fully committed to consistent fundamental execution with the objective of realizing as much of our true potential as possible in every endeavor. We will provide details of our 2015 outlook at our Investor Conference on December 2 in the context of our long-term strategy and our opportunity to serve people and to build value. So now I'll turn this call back to our moderator for your questions. [Operator Instructions] So thank you very much. Operator?

[Operator Instructions] Our first question is coming from Justin Lake of JPMorgan. Justin Lake - JP Morgan Chase & Co, Research Division: My question is on the commercial business. First, can you talk about your early view on exchange positioning in terms of products and price relative to peers, and how we should think about profit targets here given the losses in '14 that we see across the industry? And then just a quick comment on New York's small group and how we should think about over 2015 given the pushback on pricing seen from regulators. Stephen J. Hemsley: Okay, Justin, we'll respond to your 2-part question. I will offer some perspective that we are trying to participate thoughtfully in exchanges and have not -- don't have -- have not built excessive expectations on that. I think Jeff will talk to exchanges and then maybe to New York.

Sure. Good morning, Justin. It's Jeff Alter. So on your first question or your first part of your single question on public exchanges, I would say it's keeping with our strategy that we waited to see what was going on in '14 and then are using that knowledge. It built a different platform for exchanges. So when you think about where our products are positioned, many of those products come with a network construct that's probably nontraditional to what you might expect from UnitedHealthcare. We feel good about where we're positioned. We are targeting profitability in '15, probably a little bit lower than that 3% to 5% long-term range that we've talked about but still profitable. And from what we know today, we feel pretty good about where we're positioned in many of the exchanges, particularly the largest states where we expect to grow the most. New York, I would say, nothing's changed too much in New York from the competitive environment that we -- we're in the middle of this year. The rate actions -- the rate approval actions by the regulator pretty much give us, for the most part, the same competitive marketplace in New York for 2015 that we have today. We're fortunate to have a broad portfolio of fully insured business across the country, and we're managing through some of those regulator responses right now.

Our next question comes from Matthew Borsch of Goldman Sachs. Matthew Borsch - Goldman Sachs Group Inc., Research Division: Maybe I could ask about Medicare Advantage. If you could just -- I realize you'll go into detail at the December 2 Investor Day, but maybe you can just talk to the scope of the benefit changes that you made and if you can characterize how they look to you at your initial look versus what the competition has put out and maybe directionally, if you think that you'll be able to grow membership and earnings next year. Stephen J. Hemsley: Yes, I think we feel pretty good about it. Steve, you want to comment?

Sure. Hi, Matt, Steve Nelson. Yes, we really like our position going into 2015. Benefits shaped up about as we expected. We have -- we think we're positioned very well to grow in 2015 meaningfully at sustainable margins. Other software, we did add premiums, which was a important step to the long-term viability of this product, and -- but we are very thoughtful about that. We added premiums in markets where premiums already existed, and we added about -- to about 1/3 of our members. In 1/3 of those cases, we added 0 premium alternatives. In places where we didn't do that, we enhanced our benefits in meaningful ways that we knew based on our research would be important to seniors. So we feel very positive 1 day into open enrollment, and we expect to grow meaningfully at sustainable margins. Matthew Borsch - Goldman Sachs Group Inc., Research Division: And the earnings growth? Sorry. Stephen J. Hemsley: Yes, we expect to grow earnings across the board for 2015. Actually, we think all of our businesses are really better positioned than they were as we entered into '14. And really, the underpinnings of our '15 outlook, obviously, they -- different contributions, but we're expecting growth completely across all our businesses.

The next question comes from Peter Costa of Wells Fargo. Peter Heinz Costa - Wells Fargo Securities, LLC, Research Division: Can you talk about your expectations for cost trends going into the end of the year and then to next year and how you expect to be pricing for that cost trend for next year in the commercial side of the business? Stephen J. Hemsley: Sure, I think Dan Schumacher will respond to this.

Good morning, Peter. Thank you for the question. On the medical cost side, I'd tell you, in the quarter, we were very pleased with our performance in the quarter both in aggregate as well as across each of our businesses. And frankly, it was a little bit better than we expected, and you can see that in the care ratio. You can see it in a little stronger prior-period development relative to the last couple of quarters. Each year, we set a trend expectation, respectful, mindful of underlying medical costs, and then we endeavor to outperform it, and we have strong medical cost management disciplines that we apply, and you're seeing us outperform that this year. As you look at our full year commercial cost trend for 2014, we expect to perform at the low end of our range of 6% plus or minus 50 basis points, possibly a little bit better. As you look into next year on the cost side, we expect similar themes, and we'll go through the specifics of that with you at the Investor Conference, but certainly, a major component of that will be unit cost, as it is every year. It represents anywhere from 2/3 to 3/4 of the underlying cost trend, and that's something that is founded on negotiations that are happening each day every day. So we've got very good line of sight on that. With respect to pricing, I'd ask Jeff Alter to comment on that.

Morning, Peter. We've had a very successful long-term pricing discipline, so nothing's changed in our philosophy. We continue, as Dan mentioned, to be very mindful of cost trend. It's the #1 driver of our premium, and we've got a lot of programs in place to outperform those medical forecasts. That's a big underlier, and there's a lot of other things that make up the price: provider network, product attributes, business mix. But we're not changing our discipline. It's been very successful for us, and we expect it to continue to be very successful for us into the future. Peter Heinz Costa - Wells Fargo Securities, LLC, Research Division: Just to clarify, are you guys saying that you expect cost trend to be the same next year as it was this year? Or are you just saying that -- similar to this year?

Similar themes. Stephen J. Hemsley: Yes, Peter, similar in approach. We tend to view our costs as we enter the year. We tend to endeavor to outperform them. We continue to be -- to see medical cost trends and inflation going forward, and we position ourselves to price accordingly. All of that is completely consistent with the way we have approached the business for the last several years, no different, and we don't plan on changing that in '15. John S. Penshorn: Peter, it's John Penshorn. We'll be fully detailed on this on December 2. We're really not trying to walk through 2015 today. So I think we'll be able to fully answer that question here in just a few weeks.

Our next question comes from Christine Arnold of Cowen. Christine Arnold - Cowen and Company, LLC, Research Division: You've had great growth in Medicaid, and David suggests that the expansion population's pretty young and healthy. Could you speak to where your Medicaid book of business is coming in this year and your expectations for next year with respect to that book? Stephen J. Hemsley: Yes, Austin, do you want to comment?

Yes, thanks for the question. Well, first of all, we're very pleased with the growth. We are honored to have the opportunity to work with this new population, help them guide through the healthcare system. We expected higher utilization in the expansion population. In almost every case, we got paid for that higher expectation of cost, and that's what we've seen. So we expect long term for the population to perform in that 3% to 5% margin and are very confident about the continued growth. Christine Arnold - Cowen and Company, LLC, Research Division: And what do the rates look like for that population next year and the profitability for that book directionally? John S. Penshorn: Sure. Again, we expect the rates will be appropriate for the population and support long-term sustainability. We work hand-in-hand with our states across all the markets to ensure that on an ongoing basis that that's the case, and everything seems to be showing up as we expected. Stephen J. Hemsley: And we have long said that the margin ranges for those businesses are in a 3% to 5% zone, and that's kind of how they're playing out.

Our next question is from David Windley of Jefferies. David H. Windley - Jefferies LLC, Research Division: So slightly nearer-term question. If I look at the ranges and point estimates that you've given on factors like your medical cost ratio for '14, operating costs at kind of 16, 7 and even to a lesser import, your tax rate, it would seem that one or more of those would need to trend below what you've most recently said to get to your guidance range. I'm wondering which of those I should focus on as performing better, if you could elaborate, please. Stephen J. Hemsley: Well, my reaction to that question is I would stand back and look at the totality of the business. If you take a look at the spectrum of UnitedHealth Group, and that's who we are speaking to, you have the continued performance of the Optum business. We have a very strong Medicaid business in terms of its growth. We have an international business that we think will make a meaningful contribution going into next year. We have been historically very strong in our operating cost disciplines and have structured those programs for across the expanse of our businesses. I think we have nice momentum coming in our Medicare business and our commercial business. So I wouldn't lay it out to one factor or try to basically triangulate on a ratio that, really, when you have a business as diversified and as expansive as this one. So that's why I think that that's perhaps the perspective you should look at as into '15.

Our next question comes from Sarah James of Wedbush Securities. Sarah James - Wedbush Securities Inc., Research Division: Optum's always been a source of growth. But this quarter, it really seem to stand out particularly in growth in the external revenue for OptumInsight as well as improvements in the OptumRx margins. Maybe you touched on it briefly in the prepared, but I was hoping you could dig in a little bit further and talk about some of the programs you have in place driving that and how we should think about the potential of continued improvements there. Stephen J. Hemsley: We'd be pleased to. Larry, can you start that off? Larry C. Renfro: Sure. Sarah, it's Larry Renfro. Let me break it into 3 areas, and I think it'll -- we'll get -- as John has said many times, we'll get more into detail about this at the Investor Conference, but this might help you get ready for the Investor Conference. Obviously, last year, at the previous Investor Conference and into this year, we've been talking about investing in the future, especially in OptumHealth and in OptumInsight. We had that all planned, and we've absorbed, obviously, the impact, and all of our financials are in line as we continue to finish off the investment or the development in these new programs. I think in the third quarter, you saw that OptumHealth went to a 14% top line growth and 16% bottom line growth year-over-year. You also saw that the OptumInsight went 4% up on the top line and 6% up on the bottom line. So what you're starting to see is what we said would happen during the year that our investments are starting to tail off, and as a result, really, our outcomes are starting to kick in. So we believe that, that will create a strong fourth quarter as Steve referenced in his remarks. The second part of this answer is that we are obviously going after 10 large accounts that we have identified that we would do by 2016. We have probably as many sales metrics as we do financial metrics in Optum, so we are in line with all those sales metrics as we go forward. I'd say, too, that you might want to look at that would really tell you something would be our backlog. That backlog is at $7.7 billion, up 20 -- 21% year-over-year, and our sales pipeline, that's up 166% year-over-year. So that's the second part of the answer. The third part on the growth would be the 5 areas of focus that we're really concentrating on now, and this would be in the future as well. That's medical groups, Optum360, the PBM, international and the government business. So I think that if you kind of go back to the question you asked, I think we're pretty well positioned for growth, and we're pretty much hitting on all these programs. Sarah James - Wedbush Securities Inc., Research Division: Got it. And just a follow-up, the margin improvement in OptumRx, should we think about this as being the new bar for that segment? Or is there further upside from this? Larry C. Renfro: So OptumRx had a great quarter. And I think if you go back to this, what we were talking about a few minutes ago in terms of investing in the future, that's what we did a couple of years ago when we built a platform and started the process of moving the business in health. That's been a great move on our part. What I would say is what the margin really does is validate the guidance that we've been giving, that 3% to 4%, and I think we'll expand upon that more at Investor Day. Stephen J. Hemsley: Dirk, you want to add anything? Dirk C. McMahon: Yes. Sarah, it's Dirk. What I would say is if you look at the third quarter, the major driver of the better margin was things that we did in executing a direct purchasing acquisition strategy. Really, at the gross margin line is where we have favorable uptick in the quarter... Stephen J. Hemsley: And those should be sustainable. Dirk C. McMahon: Correct. And as Larry said, we'll stick with 3% to 4% in the long term op margin perspective.

Our next question comes from Ralph Giacobbe of Crédit Suisse. Ralph Giacobbe - Crédit Suisse AG, Research Division: In the release in your prepared, you suggested and talked about sort of retrained utilization, and obviously, the MLR performance would suggest that as well. Just hoping you can maybe provide a little bit more on specific inpatient and maybe outpatient metrics, if you're seeing any change on sort of QE [ph] levels. Any measurements there would be helpful. And then just last quarter, you said MLR would track at the higher end of guidance. Is that still the case? Stephen J. Hemsley: Yes, we don't actually ever get into those kinds -- that level of granular statistics, but I think we can give you some commentary to give you some sense.

Sure. Good morning, Ralph, this is Dan Schumacher. On utilization, specifically, as we've mentioned, we continue to see very stable trends across our businesses, which is to say that we see the same comparable increases in 2014 as compared to 2013. As you look at the componentry underneath it, obviously, pharmacy is higher in the hep C category, and that's being offset -- more than offset by better performance in inpatient, in particular, followed by physician and outpatient. Our medical cost management plays a very significant role in this. As I've said earlier, we do set expectations and then endeavor to outperform them, and we're doing that this year. I think some of the other things that are probably contributing to the performance in utilization is certainly some greater consumer responsibility and higher concentrations of value-based reimbursement, and again, those are things that are a significant focus of our enterprise. So overall, very stable utilization pattern. I think, perhaps, people ask how do we know, and looking at external data and so forth, and I'll tell you, as Steve said in the prepared remarks, you look at -- we have 41,000 people in any given day in a facility, and we have 2,000 people, they wake up every morning, and they look at who's going to be admitted, who has been admitted, how long they've been there, what they're being treated for, and most importantly, working with them, their family and their caregivers on appropriate discharge plan so that they can be successful when they leave. And all of that is enabled by near realtime technology, and we're going to have an opportunity to show that to you at the Investor Conference. So that's what we're seeing on the utilization front. Ralph Giacobbe - Crédit Suisse AG, Research Division: Okay, thanks, and then just MLR guidance? Larry C. Renfro: MLR guidance, again, I think we'd reiterate comments from last quarter, which is to say we'd expect to be near the higher end of the range on both the consolidated and the commercial ratios, albeit a little bit better than what we were thinking leaving the second quarter.

Our next question comes from A.J. Rice of UBS. Albert J. Rice - UBS Investment Bank, Research Division: Maybe just to ask you about the international business. It looks like there's acceleration in top line performance at Amil this quarter. I know there were some issues around government changes down there and utilization and so forth. Are you pretty much back to where you want it to be at a normalized operating trend? And then more broadly, I guess you guys have been mentioned in several international sales situations. Can you comment on your appetite for international deals at this point and whether your thinking's evolved in what you might or might not do? Stephen J. Hemsley: Yes, we are basically coming around the bend on a full year in terms of the changes in Brazil, and I think that they are -- we see some pretty positive sense in terms of that marketplace. And I'll have Dave comment on that and the others. David S. Wichmann: Thanks, A.J. Thanks for the question. I think what you're noticing in Amil is what we notice as well, is it's beginning to show tangible results from the various initiatives that we put in place largely in response to this ANS regulatory change, which happened just over 1 year ago. As you know, there was a lag on the market's ability to respond to that change. So one of the things we had to do was ensure that all of our plans were in good standing, get our renewals up, and so even in the face of declining membership, which is largely around dealing with high costs of block of business, if you will, we are showing strong revenue growth, which is largely a reflection of the activities we have underway with respect to getting renewals in place in response to that regulatory change. We're also pursuing managing our costs, and they're coming out, and we're making, I think, all the right changes to the business, and notably, our hospitals continue to perform very well as well. So it will take some time, A.J., to work our way through this. It will be maybe all the way to the end of '15 till we get to what I would characterize as a more normalized level of profitability in the business, but we clearly see line of sight towards that. As it relates to the international markets and our appetite there, yes, we are active predominately in Brazil, predominantly in the healthcare delivery space, predominantly in the long lines that I described before, which is to move beyond the centers of São Paulo and Rio de Janeiro into the contiguous cities, if you will, and then also to pursue growth in the Northeast part of that country. Our efforts there have gone very well. And then, of course, we have other interests internationally, but I'd say most of those are aimed towards the South America and Latin American markets. And then as we think about more broadly across the globe as well as in those 2 markets, we see great opportunity for Optum, which we are just beginning to pursue.

Next question comes from Josh Raskin of Barclays. Joshua R. Raskin - Barclays Capital, Research Division: I wanted to take a step back just on the benefits business and the M&A landscape, and it's been, I think, 2 years now since there's been any major M&A on the benefit side, and it's been even longer for United. So I'm just curious, is there a reason for this pause? Is there something in the market that changed with reform? Is it just an unsure landscape as to who the winners and the losers are in some of the benefits business? Just maybe your perspectives on M&A, maybe even broadly beyond UNH, just in the benefit segment specifically. Stephen J. Hemsley: Yes, I'll just comment that, perhaps, the highest levels certainly with the healthcare reform efforts that have been going forward, I could easily see this marketplace being fairly occupied in making sure that this is -- everybody in this space that they are prepared to and responding to the changing regulatory landscape and to make sure that they're pursuing the opportunities and managing the challenges that those regulatory changes brought forward. And I think that it continues to go forward. I think it's been a very successful first year across the industry in terms of how that has been responded to. Joshua R. Raskin - Barclays Capital, Research Division: And when are you left occupied with those responses? Stephen J. Hemsley: Well, I think my view is that this year was, by far, the most amount of changes, but they're going to have to be digested in the marketplace over the next 2 to 3 years. But I would not necessarily suggest then that there'll be a time when there will be market activities around M&A -- begin to pick up and so forth. I'm not sure I would necessarily -- when we take a look at the expanse of our business, we are well diversified across our benefits business, continue to be interested in growing that and making sure it continues to innovate and drive value from an organic point of view and to be in a position that where we see opportunities to expand that business that makes sense, that lie into our strategic path, that bring capabilities, that bring market positions or scale. That we will -- we would have an interest, and I would imagine others will as well. We have opportunities to also allocate capital to services and to international markets, and we will have to assess those as well. So I don't think it's -- my sense is that it requires a little bit more thoughtful reflection than just when will the reform run its course or not. And I think that I'm impressed that across the space, the businesses have been mature in terms of how they responded, and I think everybody is focused at the opportunities at hand.

Our next question comes from Scott Fidel of Deutsche Bank. Scott J. Fidel - Deutsche Bank AG, Research Division: Just to add 2 quick ones, just first, how much of the $200 million and the targeted Optum investment spend has now been completed through the 3Q? And how much remains for the fourth quarter? And then just secondly, just I know it's very small for you guys in the overall context of things, but just interested on Texas Medicaid. That's been one of the states that has still been reticent to cover the industry fee. And we've heard some mixed feedback from different plans on whether they expect to get paid on that or not. So definitely very interested in whether you've heard something from Texas on whether you're going to get recouped for the industry fee this year. Stephen J. Hemsley: So that will go from one side to the other. So John, you want to respond to the first?

Yes. Scott, John Rex here. So yes, correct. We've talked in the first half about the investments that we've been making, particularly within the OptumInsight and OptumHealth businesses, and we sized that up in the first half at $140 million, talked about $200 million or more for the full year in terms of anticipating in investing those businesses. So in the 3Q, we would have invested an additional $60 million, so we hit our $200 million. I do anticipate that we will continue to spend in the fourth quarter, albeit, at a diminished rate. However, that is within the scope of our guidance where we've talked about our comfort with the high end of our $3.2 billion earnings range. Stephen J. Hemsley: Austin?

Sure, thanks for the question. I guess, first of all, I'd comment that we had great progress, as you know, in getting arrangements and agreements in place with our states on the recovery of this fee. There is one instance, as you mentioned, that we don't have written agreement yet. We do expect to be paid. We expect all of these to come in before the end of the year. We haven't recorded revenue in that one instance, but we feel very good overall.

We'll take our next question from Kevin Fischbeck of Bank of America. Kevin M. Fischbeck - BofA Merrill Lynch, Research Division: A couple quick questions on the individual exchange business. I want to clarify something first. You said that you expect it to be slightly below kind of the longer-term margin in that business of 3% to 5%. But I think in the past, you've talked about pricing that business to profitability kind of excluding the 3 Rs, not relying on them to make a profit. And I would think that if you are pricing that way, then with the 3 Rs, you would be at least at the -- that average number. So I just want to clarify that before a follow-up on the exchanges.

Kevin, it's Jeff Alter. Yes, so we're not exclusive of all of these Rs, so we would not rely on corridors. We will, obviously, rely on the reinsurance and the risk adjustment. Risk adjustment is a big part of it. So while we will get into that 3%, probably closer to the 5% as the market matures, we also recognize that it's still a market in development, and our competitors that are already in the marketplace, we need to be able to come in at a price point that attracts a little bit of growth but still profitability, and then build into that marketplace. So this is a long-term build for us but -- so just clarifying, we will not rely on corridors, but the other Rs are important parts of that business, and risk adjustment will always be an important part of that. Kevin M. Fischbeck - BofA Merrill Lynch, Research Division: Okay. So is this a clarification then or is this something that now that you've seen the pricing and everything else that it's a little bit different? Or -- I just wasn't sure.

Kevin, this is Gail Boudreaux. I just want to sort of add on to Jeff's comment about what he said. I mean, it's not so much a clarification. It's always been our long-term strategy. We see this market as a really good growth -- long-term growth opportunity. As we said in the last several calls, we don't expect to rely on subsidies as part of that, and we are pricing to profitability. But in any new market, as you enter a market, we don't necessarily think that we'll see our 3% to 5% earnings range in the first year. And again, remember, 75% of this market has yet to develop, and we are seeing it firm and stabilize a little bit, but it's still only the second year in the market. But overall, we went into this market with an expectation of earning a profit in it. Kevin M. Fischbeck - BofA Merrill Lynch, Research Division: Okay, because that was going to be my real question, was just how do you think the [indiscernible] market is going to evolve in 2015? I mean, do you think the CBO target of $13 million makes sense? And then how do you think about your positioning as, I guess, a strong second mover versus the incumbents? I mean, in retrospect, if you had known that membership would be 7.3 million, would you have been more aggressive in year 1? Or I guess just any thoughts there. Stephen J. Hemsley: No, no. We like where we are, or we would have played this just exactly as we have. We think the second vintage will be better. The third vintage will be better after that. This market will form. It will be different market by market. It will take time for it to evolve. It will eventually evolve into about the profit margin range that we have been discussing. We're not going to comment on CBO. We have no idea from that point of view whose projections are correct. So far, all we can say is everybody's projections have been wrong. And so we will just play this and participate as we see this market evolve, which has been completely consistent with our perspective on this, and we do anticipate too that we will participate in this a way that is sustainable from a growth and profitability point of view, but we don't have that kind of mature margin assumption in your first couple years of participation, and we really don't have a lot of this into our 15-year outlook, but this is really just our introduction. We expect to participate. We expect to grow, but we're not expecting tremendous profit out of that first year participation. So I think that's ought to be the way you think about it.

Our next question comes from Andy Schenker of Morgan Stanley. Andrew Schenker - Morgan Stanley, Research Division: So one of your peers just pulled out of the Delaware Medicaid program over a rate disagreement. I believe you're the only other MCO in the program. So first of all, do you expect to enroll the 130 members next year? And then more broadly, how are your rate discussions going for Medicaid next year in the areas of pushback on rates? Stephen J. Hemsley: Austin?

This is Austin. Thanks for the question. We do have an agreement in place with Delaware. We look forward to continuing to serve the people of Delaware and stay focused on being ready to do that. I won't speculate on -- at this early date on where that membership will play out, but overall, we continue to feel confident in our relationships with our states, our ability and proven track record in working with states to really serve those populations and deliver that long-term sustainability in that 3% to 5% margin. Stephen J. Hemsley: And the states see value in that. These are complex programs. They're invested in them, and Medicaid programs are continuing to establish themselves very well.

Yes, I think the great growth that we've seen this year and our ability to work year-over-year with states is a reflection of the trust they've put in us to serve their populations. Stephen J. Hemsley: And I think Medicaid has been one of the strong successes of the ACA effort.

Our next question comes from Ana Gupte of Leerink Partners. Ana Gupte - Leerink Swann LLC, Research Division: The question's on the employer market and mix shift potentially in 2015 given the data points of Walmart, which dumped, I think, 30,000 workers. Some of your competitors are talking about small group under 10 dumping into exchanges. But on the flip side, the private exchange market and adoption's been slower from the recent [indiscernible] data points, and there's an employer mandate 1/1/2015. So are you looking at '15 as a big year of mix shift? And is there potential for disproportionate share gains for you because the band stickiness is not that great? And what are you assuming in your soft 2015 EPS guide of kind of in line with consensus? Stephen J. Hemsley: That's quite a question. Gail, do you want to start?

Sure. That is quite a question. There's a number of things embedded. Let me first talk about the mix shift question you had, and take it in a couple of parts. The first, let me deal with your question on small employer dumping. We don't -- we have not seen a lot of that. We don't really expect an acceleration in that given how reform has laid out in some of the offerings that are still in the marketplace. So I don't expect any significant increase in dumping, although we do expect some decline in the mark, which has been happening over time but not a significant dumping. In terms of the overall market, you mentioned employers getting rid of or taking down their part-time employees. Let me start with our expectations around the large marketplace. Overall, the national account marketplace has been -- we feel positive about that marketplace. We're pleased with our competitive position in it, and we do expect better results in '14 than in '13. We had a stronger close ratio. But with that, getting to your second question, we do have a very focused strategy when there's an opportunity in exchanges to help convert some of our self-funded business to fully insure the exchanges, and we are seeing some of that, which comes out of our commercial enrollment. And the other sector of the market that's happening is the retiree population is moving from the self-funded book of business, particularly in our national accounts, to our Medicare advantage, our Medicare supplement and our Part D products. And again, we've been very successful in that in '14, and we expect to be successful in '15. That's been a very specific strategy. So those are the kind of changes going on in the market, and we feel good about our positioning in that. Stephen J. Hemsley: I'd say just the expanse, the diversification of our benefits offerings suggest that even if there are shifts in the marketplace, we're really well positioned to accommodate those shifts and I think pretty agile in that context.

Our next question comes from Carl McDonald of Citigroup. Carl R. McDonald - Citigroup Inc, Research Division: On the cost trend, so sub 5% last year, a little bit under 5.5% this year. Can you walk through what's accounting for that, call it, 50 basis point increase this year versus 2013?

Sure, Carl, this is Dan Schumacher. One of the primary elements of the increase year-over-year is reform related. We talked about that at the investor conference last December, that as people moved into richer plans complied with community rating and so forth that was one of the elements that -- principal elements that drove the increase. Stephen J. Hemsley: Thank you. So I think we will close, and as we close today, I'd like to remind you that 2014 performance across both Optum and UnitedHealthcare remains strong through the first 9 months of the year, and we expect to continue that consistent performance through the rest of 2014 and to remain in line with or ahead of our outlook that we shared with you today. And in 2015 and beyond, we expect our overall business performance will further strengthen and accelerate both top line and bottom line. And we look forward to sharing more detail with you around 2015 performance at the Investor Conference on December 2 in New York. So thank you for your attention today. Thank you.

This does conclude today's UnitedHealth Group Third Quarter 2014 Earnings Conference Call. You may disconnect your lines, and, everyone, have a good day.