UnitedHealth Group tops estimates, hikes profit outlook as insurer manages high medical costs

UnitedHealth Group on Tuesday posted third-quarter earnings that blew past estimates and raised its full-year profit outlook, as the company continues to manage high medical costs and sees investments in value-based care and artificial intelligence take hold.

The nation’s largest private insurer said it expects fiscal 2026 adjusted earnings of at least $20.50 per share, up from a previous outlook of $19.50 to $20 per share.

The healthcare giant’s turnaround plan is gaining momentum after three consecutive strong quarters this year. UnitedHealth is working to stabilize margins by shrinking membership, exiting unprofitable contracts and ramping up investments in artificial intelligence and value-based care, which tie doctor and facility compensation to patient health outcomes, quality of care and cost effectiveness rather than the volume of medical services provided.

“You’ll see in the quarter that we continue to execute not only on the financial aspects of our business, but really doing them with a simpler approach and an approach that’s really focused on investing heavily in value-based care,” CFO Wayne DeVeydt said in an interview.

Shares of the company rose about 3% in premarket trading.

Here’s what the company reported for the third quarter compared with what Wall Street was expecting, based on a survey of analysts by LSEG:

• Earnings per share: $4.69 adjusted vs. $4.14 expected
• Revenue: $112.69 billion vs. $111.40 billion expected

The company posted third-quarter net income of $4.11 billion, or $4.56 per share, compared with $2.35 billion, or $2.59 per share, in the same period a year ago. Excluding items like business divestitures, restructuring and the expected reduction of reserves for unprofitable contracts, UnitedHealth earned $4.69 per share.

Revenue fell to $112.69 billion from $113.16 billion in the prior-year quarter. The company’s insurer, UnitedHealthcare, and its Optum healthcare unit both topped analysts’ operating earnings estimates for the quarter, according to StreetAccount. 

Notably, UnitedHealth’s medical cost ratio — a measure of total medical expenses paid relative to premiums collected — came in at 88.4% for the third quarter. Analysts were expecting a ratio of 89.9% for the quarter, according to StreetAccount. A lower ratio typically indicates that the company collected more in premiums than it paid out in benefits, resulting in higher profitability.

Still, DeVeydt told CNBC that medical costs in the quarter “continue to be elevated versus historical norms” – an issue that has plagued insurers, particularly those operating privately run Medicare Advantage plans, for more than two years.

“I think it’s something we should keep an eye on. I think you’ll see that our medical care ratio has improved quite a bit, but I don’t want that to be misleading in terms of [medical cost trends],” DeVeydt said. 

He said the independent dispute resolution (IDR) process under the No Surprises Act is adding at least 100 basis points, or 1 percentage point, to total medical costs. That federal law, which took effect in 2022, aims to protect consumers from unexpected medical bills

The IDR process allows providers and insurers to resolve disputes over out-of-network payments. DeVeydt said those changes are driving up the company’s claims costs, which can ultimately be passed on to consumers through higher premiums.

DeVeydt added that costs for inpatient services and pharmacy, particularly costly specialty pharmacy drugs for cancer and rare diseases, remain elevated. 

Still, he highlighted the company’s value-based care efforts, which are helping control medical costs by steering patients toward the right providers and emphasizing preventive care, DeVeydt added. 

He said acute hospital admissions among UnitedHealth members fell 15% year over year through the third quarter, while home health admissions rose 10%, suggesting more patients are receiving care in lower-cost settings. 

“You’re finding more members are actually getting into a lower-cost care environment, but more importantly, they’re getting into the care environment they actually want to be in,” he told CNBC. “So we think we’re really balancing both the quality and the cost.”

UnitedHealth is also rolling out AI-powered ambient listening tools to reduce physicians’ administrative burden and free up time for patient visits. Appointment scheduling done by patients rather than with the assistance of a provider increased 27% year over year, DeVeydt said. 

He expects those initiatives to have a compounding effect on medical cost management through the fourth quarter and into 2027 as the programs expand.