UPDATED: Noon ET on Oct. 28
The top brass at UnitedHealth Group offered investors a look at the company's efforts to right the ship after several rough financial quarters.
CEO Stephen Hemsley said that 2026 is shaping up to be a "stepping-off point" for the healthcare giant as it aims to return to growth. He said the company intends to balance its push for earnings growth in 2026 with key investments to position it for a strong 2027 and beyond.
"We’re getting at the core of the underperformance issues with fresh perspectives, intent on positioning our organization as a positive and innovative leader helping to advance the next era of healthcare," Hemsley told investors during the company's third-quarter earnings call Tuesday. "A keen sense of urgency in this effort is consistent throughout the enterprise."
The company has been working across its enterprise to make improvements and while that effort takes time, it's on track to bear fruit in some areas, Hemsley said. For example, he said that broad repricing across the UnitedHealthcare book of business is set to drive margin improvement beginning next year.
In other units, like Optum Health and Optum Insight, the turnaround efforts will require greater time and investment, he said. Optum CEO Patrick Conway, M.D., said that in reviewing the performance at Optum Health specifically, several key problems emerged.
"Over the last few years, through a period of rapid expansion, Optum Health’s strategy around value-based care strayed from the initial intent of the model," Conway said.
For one, its provider network has expanded significantly over the past several years, and grew too large, Conway said. Alongside that, the rapid pace of expansion coupled with slow integration meant that there was inconsistency in operations between providers, made worse by affiliated providers that weren't as aligned to Optum's value-based care model.
In addition, Conway said that Optum Health "was accepting risk in products and services less suited for a clinically oriented value-based model."
To address these challenges, Conway said that Optum Health has focused on its leadership team and is pushing toward a narrower, more integrated provider model, steps that are expected to pay off in 2026. Executives stress, though, that reorienting Optum Health's model doesn't signal a retreat from value-based care.
Tim Noel, CEO of UnitedHealthcare, said during the investor call that the repricing effort at the insurance business extends to its Affordable Care Act plans, which are set for an average rate increase of more than 25%. This reflects compounding morbidity in this market, he said.
Noel said that while these pricing actions are set to "establish a sustainable premium base," UHC expects ACA enrollment to decrease by close to two-thirds. Open enrollment on the exchanges begins on Saturday.
Rate adjustments should play a key role in stabilizing margins in the individual and employer segments, Noel said, but Medicaid remains a challenge. He said that states have underfunded the program relative to cost trends, meaning "funding levels are not sufficient to cover the health needs of state enrollees."
Noel said that the team is making progress with states in resolving this issue, but expects to see the mismatch in rates and member acuity carry into 2026.
"While 2025 remains a transition year, the pressure we experienced is largely a result of mispricing and suboptimal market positioning," Noel said. "We remain humbled by the challenges of this environment and the lessons we’ve had to learn once again, but confident that we are in solid footing to recapture our performance potential."
Shares in industry giant UnitedHealth Group rose before market open as the company boosted its guidance for the year.
UHG reported its third-quarter earnings Tuesday morning, in which it said it now expects to bring in at least $16.25 in full-year earnings per share. In the second quarter, the company estimated $16 in earnings per share for the year.
The guidance boost comes with more positive news for the company, as it surpassed Wall Street's expectations on profit after posting a miss in both the first and second quarters—a rarity for UnitedHealth—as it navigated elevated medical costs and other headwinds.
The company reported $2.4 billion in profit for the third quarter, down from the $6.1 billion in reported a year ago. Profits through the first nine months of the year were $12 billion, growing year over year from the $8.9 billion posted through the first three quarters of 2024.
The company did fall short of Wall Street's estimates on revenue, according to Zacks Investment Research, with $113.2 billion. That is a significant jump year over year, however, compared to the $100.8 billion haul reported in the third quarter of 2024.
UHG has brought in $334.4 billion in revenue through three quarters, up from $299.5 billion through the first nine months of 2024.
“We remain focused on strengthening performance and positioning for durable and accelerating growth in 2026 and beyond, and our results this quarter reflect solid execution toward that goal,” said Stephen Hemsley, CEO of UHG, in the press release.
At UnitedHealthcare, revenues grew 16% year over year to $87.1 billion, reflecting growth in Medicare and Medicaid. The company boasted 50.1 million members in the third quarter, up by about 795,000 year over year.
The company said its medical loss ratio was 89.9% in the quarter, tracking with the ongoing trend toward higher utilization that the entire insurance industry is feeling.
Revenues at Optum, meanwhile, increased 8% year over year to $69.2 billion. It reported flat revenue $25.9 billion at Optum Health and $4.9 billion at Optum Insight, while revenue was up 16% compared to the prior year quarter at Optum Rx, posting $39.7 billion.
Optum Health continues to feel the sting of elevated utilization, the company said, as well as a reduction in Medicare funding.
The company's share price was up by about 1% premarket.