Dive Brief:
UnitedHealth seems to be making progress on righting the ship, beating Wall Street’s expectations in the third quarter and raising its 2025 earnings outlook on Tuesday.
During a call with investors, CEO Stephen Hemsley said the company is on track for “solid earnings growth” next year, citing UnitedHealth’s “operational rigor” and “more prudent pricing.” UnitedHealth is aiming for double-digit growth in 2027, Hemsley said.
UnitedHealth is preparing for significant membership losses next year as it prioritizes this earnings recovery. The company experts to lose about 1 million Medicare Advantage members and shrink its Affordable Care Act enrollment by approximately two-thirds in 2026.
Dive Insight:
Normally the darling of Wall Street, UnitedHealth has struggled this year amid unexpectedly high medical costs that caused the company to miss earnings expectations in April for the first time in over a decade. UnitedHealth was punished accordingly — its stock plummeted to its lowest level since during the coronavirus pandemic, and though it has recovered somewhat since, its value remains down more than 27% year to date.
As such, UnitedHealth’s third quarter results and guidance raise are a positive development for the company — especially given that expectations were low after health insurance peers Elevance and Molina reported more worrying results last week.
UnitedHealth posted revenue of $113.2 billion in the quarter, up 12% year over year. Net income of $2.3 billion was down 61% year over year, though earnings were still better than analysts had feared.
“One quarter doesn’t make a trend, but we see this 3Q print as a first step towards returning to [UnitedHealth’s] historical expectations management,” J.P. Morgan analyst Lisa Gill commented in a note on the results.
UnitedHealth has been making progress on the turnaround that Hemsley outlined for investors in July, according to the CEO. That includes reshuffling its executive bench and retrenching across a number of its businesses to bolster margins, like doubling down on cost controls in payer arm UnitedHealthcare and investing to improve operations in health services division Optum.
“Our enterprise continues to advance on the improvement paths,” Hemsley said.
The Minnetonka, Minnesota-based company now expects adjusted earnings of at least $16.25 per share this year.
It’s an increase, albeit a modest one, from UnitedHealth’s prior guidance of “at least” $16 per share — and is still well below the company’s initial outlook for 2025, before it knew just how drastic medical cost growth would be.
Coming into 2025, UnitedHealth expected full-year adjusted earnings of $29.75 per share at the midpoint. The company cut that forecast to $26.25 in April before pulling its guidance altogether in May.
UnitedHealthcare, the largest private insurer in the U.S. with 50.1 million members, has been slammed by a wave of medical costs this year, especially in Medicare Advantage as seniors utilize more medical care and providers code services at a higher level.
Pressure has also been apparent in Medicaid, as states’ payment rates continue to be inadequate to cover cost trend, and in the Affordable Care Act, which is also experiencing skyrocketing utilization.
In the third quarter, medical costs remained “historically high” but in line with UnitedHealthcare’s expectations, Tim Noel, the CEO of UnitedHealthcare, said during the call.
The “vital element” for 2026 is pricing, according to Noel. Since the summer, “we’ve repriced the vast majority of our [UnitedHealthcare] risk businesses, including Medicare Advantage and, to varying degrees, our commercial fully-insured and residual ACA offerings,” he said.
The moves place each of UnitedHealthcare’s businesses on a path to grow margins in 2026 “with the exception of Medicaid,” given the mismatch between rate adequacy and member acuity is expected to continue, Noel added.
Higher margins here come hand in hand with membership losses. UnitedHealthcare now expects to lose roughly 1 million MA members next year due to the actions it’s taken to recover profits, executives said.
That includes 600,000 members who are impacted by previously announced plan exits, and another 400,000 members that UnitedHealthcare now expects to lose to competitors that priced their plans more aggressively, according to Noel.
As for its ACA business, UnitedHealthcare has secured average rate increases of more than 25% in the 30 states where it offers exchange coverage next year, the UnitedHealthcare CEO said.
Insurers are hiking premiums for 2026 as they prepare for a potential exodus of healthy individuals from the exchanges, given more generous subsidies for ACA plans are currently set to expire at the end of this year.
UnitedHealthcare is exiting markets where it was unable to get the rate increases it wanted.
“We believe these actions will establish a sustainable premium base while likely reducing our ACA enrollment by approximately two-thirds,” Noel said.
UnitedHealthcare does not break out specific ACA enrollment so it’s unclear how many members will be affected.
Overall, UnitedHealthcare’s results in the quarter exceeded expectations, with revenue up 16% year over year to $87.1 billion. Operating income fell 57% year over year to $1.8 billion but was still higher than analysts predicted.
In comparison, Optum, which increased revenue 8% to $69.2 billion in the quarter, underperformed analyst expectations. Operating income of $2.5 billion was down 44%.
The division’s underperformance was especially acute in healthcare delivery arm Optum Health. In part, Optum CEO Patrick Conway blamed Optum Health for growing too quickly and including too many providers in its networks, making it harder to control costs, along with Biden-era reimbursement cuts. The business plans to narrow its networks, cast off unprofitable members and return to a clinical framework that better underpins value-based care, Conway said.
Optum’s value-based care membership will shrink by roughly 10% next year as a result.
