Repricing within UnitedHealthcare is on track to drive solid operating earnings growth from margin improvement within that business in 2026. Even so, I'm confident we will return to solid earnings growth next year, given the operational rigor and more prudent pricing. While we are still finalizing 2026 plans and intend to share full guidance with you in January, our current analyst consensus captures a likely stepping-off point for next year. We intend to balance our earnings growth ambitions in 2026 with investments and actions that will drive higher and sustainable double-digit growth beginning in 2027 and advancing from there.

Our longer-term outlook will be refreshed as we continue to execute over the next year. Medical cost trends remain historically high but consistent with our second quarter guidance, and we expect that to continue throughout the remainder of 2025. Taken together, these actions position each of our businesses on a clear path towards margin growth in 2026, with the exception of Medicaid, which I will discuss in a moment. We forecast a full-year 2025 trend of approximately 7.5% in Medicare Advantage, consistent with our previous expectations.

Our plan for next year reflects a conservative path focused on margin growth. Turning to commercial, we are focused on pricing and cost management efforts to support 2026 margin recovery. We expect the vast majority of our employer insurance businesses to be repriced for 2026 and to return to our normal margin range in 2027. These actions should drive margin improvement in our employer and individual segment in 2026, though still below our targeted 7% -9% range.

What went well
  • Q3 adjusted EPS of $2.92 came in slightly ahead of expectations.
  • Revenues exceeded $113 billion, up 12% year-over-year, with domestic membership up more than 780,000 lives year-to-date to over 50 million.
  • UnitedHealthcare repriced the vast majority of its risk businesses, putting each on a clear path to margin growth in 2026 (except Medicaid).
  • Medicare STARS scores improved year-over-year, with ~80% of Optum at-home members and nearly 100% of ISNP members in 4-plus star plans.
  • Optum Rx posted double-digit pharmacy revenue growth with a strong selling season, stronger retention and new customer growth.
  • About 90% of value-based payer contracts were complete for 2026, on track to offset roughly half of the V28 headwind through contracting; strong cash flows at 2.3x net income.
What went wrong
  • Medical care ratio rose to 89.9% from 85.2% in the prior-year quarter on historically high medical cost trends.
  • Operating cost ratio of 13.5% was higher than 2Q guidance due to more than $450 million of added investments in people and the UnitedHealth Foundation.
  • Optum Health value-based care margins were under 1%, with total Optum Health margins expected just under 3% for 2025.
  • Medicaid recovery remains challenging, with the rate-to-acuity mismatch expected to extend through 2026 and margins declining further.
  • ACA enrollment is expected to fall by roughly two-thirds on 25%+ rate filings, and Optum Health value-based care membership is expected to shrink about 10% in 2026.
  • Debt-to-capital held at 44.1% following the $3.4 billion net Amedisys close, with buybacks and strategic M&A still paused; a preliminary Q4 non-GAAP, substantially non-cash low-single-digit-billion charge was flagged.

Guidance Changes

MetricPeriodCurrent guidance
2026 EPSFY2026comfortable with current analyst consensus (formal guidance in January)
Operating cash flowFY2025$16 billion (~1.1x net income) (reaffirmed)
Medicare Advantage membershipFY2026contraction of approximately 1 million (individual and group)
Medicare Advantage medical trendFY2025 / FY2026~7.5% in 2025; priced at 10% for 2026
ACA enrollmentFY2026decline by approximately two-thirds
Optum Health marginFY2025just under 3% (value-based care under 1%)
V28 headwindFY2026more than $6 billion enterprise, roughly half offset
Debt-to-capital ratioH2 2026trend closer to 40% (improving)
Q4 restructuring chargeQ4 2025non-GAAP, substantially non-cash, low single-digit billion dollars (preliminary)

Performance Breakdown

MetricYoYNote
Adjusted EPS $2.92, slightly ahead of expectations steady execution while working through longer-term improvement plans
Revenues +12% to over $113 billion domestic membership expansion of over 780,000 lives year-to-date
Medical care ratio 89.9% vs 85.2% a year ago historically high but expected medical cost trends aligned with 2026 pricing
Operating cost ratio 13.5% larger-than-planned investments including >$450 million in employee incentives and Foundation contributions
Operating cash flow $5.9 billion (2.3x net income) strong cash generation and a 1.7-day sequential rise in days claims payable
Debt-to-capital ratio 44.1%, roughly stable cash-efficiency actions offset by the $3.4 billion net Amedisys disbursement

Earnings Call Themes & Trends

TopicPrevious mentionCurrent periodTrend
Medicare Advantage medical trend2Q guidance of ~7.5%~7.5% full-year 2025, 10% assumed for 2026Stable but elevated
Optum Health value-based care restructuringissues identified in Q2~90% of payer contracts done, ~10% VBC membership decline and 200,000 exits planned for 2026In progress
Optum Insight and AIneeds investmentOptum Real, Integrity One and Crimson AI launched with strong productivity/ROI metricsInvesting
Capital deploymentpaused in Q2still paused; may reinstate buybacks and M&A in H2 2026Pending
Medicaidrate-to-acuity mismatchexpected to extend through 2026 with declining marginsPressured
Portfolio and international reshaping—reducing international footprint, realigning Optum Financial, quantifying a Q4 chargeReshaping

Q&A Summary

Can you break down Optum Health's revenue mix and how much comes from UHC versus fee-for-service? (Josh Raskin, Nephron)
Patrick Conway said the mix is about 65% value-based care, 15% fee-for-service care delivery and 20% payer/employer services, with roughly two-thirds of the VBC book serving UnitedHealthcare; 2025 is closing just under a 3% Optum Health margin with VBC under 1%.
Where does Optum Insight sit competitively, where do investments go, and when does growth re-accelerate? (A.J. Rice, UBS)
Sandeep Dadlani said the competitive base is strong and highlighted AI-first products including Optum Real, Optum Integrity One (73%/23% coding productivity gains) and Crimson AI (13:1 average ROI), describing a journey from services to products to platforms with an AI-first workforce.
Are commercial margins targeted back to the 7%-9% range by 2027 off a 3%-5% 2025 base? (Justin Lake, Wolfe Research)
Tim Noel confirmed meaningful 2026 progress from repricing, noted 2026 will still run about 150 bps below the low end, and reaffirmed the 7%-9% long-term range as attainable.
How do the ~1 million MA membership declines break down across individual, dual and group? (Stephen Baxter, Wells Fargo)
Bobby Hunter said about 600,000 comes from product exits, with the balance split roughly evenly between group MA pricing pressure and individual MA; industry growth in 2026 should resemble 2025 given benefit cuts, plan closures and broker commission changes.
Is the Medicaid margin still -1% to -1.5% and is there a path to recovery in 2027-2028? (Ann Hynes, Mizuho)
Mike Cotton said the Medicaid view is unchanged, with breakeven in 2025 and some 2026 margin degradation viewed as the trough (driven by specialty pharmacy, behavioral health and home health), and a return to around 2% rated margins over an 18-24 month period.
Can you elaborate on provider coding and billing driving trend? (Whit Mayo, Leerink)
Tim Noel described higher service intensity per encounter, higher-cost sites of service, more specialists rounding on inpatient stays and a bias toward higher DRGs, addressed through network actions, AI-enabled payment integrity and clinical affordability programs; the IDR process is not a material trend driver.

More on Unitedhealth Group Inc

Reported 2025-10-28 · figures from the Unitedhealth Group Inc Q3 2025 earnings call.

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