UnitedHealth Group Turnaround Gains Steam as Medicare, Optum Trends Improve

Key Points

• UnitedHealth’s turnaround remains on track: Medicare Advantage trends are supporting the upper half of its previously projected 2%–4% margin range, while improved pharmacy and clinical quality metrics offset some customer-experience declines from benefit changes.
• Medicaid performance is improving: The company expects margins closer to a 1.1% loss rather than the 1.7% loss previously projected, with 2026 still viewed as a trough year and a return toward breakeven or profitability anticipated in 2027.
• Optum is delivering operational gains, including better utilization, physician productivity and expanded patient access, while commercial insurance remains pressured by dispute-resolution costs and changing risk pools. UnitedHealth also plans at least $5 billion in share repurchases this year, up from its initial $2.5 billion target.

UnitedHealth Group NYSE: UNH executives said the company’s turnaround remained on track, citing continued strength in Medicare Advantage, Medicaid performance that is tracking toward the favorable end of expectations, and operational improvements at Optum Health.

Speaking at an investor conference, CFO Wayne DeVeydt said the company’s outlook had not changed since its second-quarter earnings report. He said management is optimistic about 2026 but is increasingly focused on the pace of improvement heading into 2027 and 2028.

“Trajectory of things continue to be positive,” DeVeydt said, pointing to Medicare performing better than expected, Medicaid tracking in line with expectations and Optum Health’s ongoing turnaround. He also noted continuing pressure in commercial insurance stemming from the independent dispute resolution, or IDR, process.

Medicare Advantage trends support upper end of margin range

DeVeydt said the company had seen continued durability in the medical-cost trends observed through the first half of the year, though he declined to comment directly on third-quarter results.

In Medicare Advantage, he said UnitedHealth’s first-half performance supported its expectation of landing in the upper half of its previously stated 2% to 4% margin range for the year. The company had repositioned its product portfolio entering the year, making what DeVeydt described as difficult decisions on product durability and sustainable margins.

Management expects its pricing and benefits to be competitive for 2027, he said. The company has made benefit-design changes in some markets and continues to rightsize products selectively. DeVeydt said those changes had affected customer experience measures, including CAHPS scores, but management believed they were necessary.

On Medicare Star ratings, DeVeydt said the company improved all four pharmacy metrics and improved 10 of 12 HEDIS metrics, while the other two remained stable. CAHPS performance declined as expected following benefit changes, he said.

Optum Health CEO Krista Nelson said the administration’s interest in expanding value-based care could extend beyond Medicare Advantage and into traditional Medicare. She said the Star program offers insight into improving outcomes while also identifying administrative burden in the health system.

Medicaid margins expected near favorable end of guidance

UnitedHealth expects Medicaid margins to be closer to a 1.1% loss than a 1.7% loss this year, DeVeydt said. The company had previously projected a negative margin range of 1.1% to 1.7%.

He said the primary Medicaid issue had been funding rates rather than broad medical-cost trend. The company was seeking blended rate increases of roughly 6% to 7% across its Medicaid book, and those increases have materialized as expected, including off-cycle rate adjustments.

Behavioral-health costs had risen sharply in 2025, but DeVeydt said UnitedHealth has not seen a broader “halo effect” on medical trend and has been able to mitigate some behavioral-health trend. The company continues to view 2026 as a trough year for Medicaid margins, with a return toward breakeven or profitability expected in 2027.

To support margins, the company is pursuing a multiyear cost-reduction effort involving billions of dollars rather than hundreds of millions, DeVeydt said. Optum CFO Ben Eklo said the effort includes automation in claims, call operations, approvals, clinical documentation, revenue-cycle management and corporate functions such as finance, human resources and marketing.

Commercial business faces IDR and risk-pool pressure

DeVeydt said commercial insurance margins held steady year over year but did not expand as management had expected. IDR accounted for roughly one percentage point of pressure, while changing risk pools also affected results.

He said a small number of companies account for a substantial portion of IDR cases, describing the process as a legislative loophole that requires congressional action. Until there is a legislative solution, UnitedHealth must price for the higher costs, which DeVeydt said adds pressure to consumer affordability.

The company has begun repricing initiatives and expects additional opportunities through the January renewal cycle. In the public exchanges, DeVeydt said membership has been more durable than expected following price increases and medical trends have aligned with pricing. He characterized the exchange business as a low-single-digit-margin business over time.

Optum Health cites clinical and operational gains

Nelson said most of Optum Health’s first-half outperformance was driven by clinical management and operating execution rather than improved Medicare Advantage underwriting. She cited improvements in inpatient utilization, readmissions, skilled nursing facility admissions and length of stay.

Operational initiatives included physician productivity, scheduling improvements and expanded patient access. Nelson said Optum Health increased patient-facing hours by more than 12%, or 200,000 hours, during the first half.

The company has addressed or mitigated the vast majority of its addressable payer contracts for 2027, Nelson said. While top-line growth will not be the primary focus next year, Optum Health is targeting earnings growth and progress toward a 6% to 8% margin range, with 2027 also positioning the business for growth in 2028.

Eklo said Optum Insight is performing in line with expectations and is expected to finish 2026 closer to the upper end of its 18% to 22% margin range. The unit is investing in newer technology and AI-enabled products, including Optum Real, Crimson and Optum AI.

On capital deployment, DeVeydt said UnitedHealth expects its debt-to-capital ratio to approach 40% by the fourth quarter, compared with roughly 45% a year earlier. The company now expects to deploy at least $5 billion for share repurchases this year, up from an initial expectation of about $2.5 billion, while continuing dividend growth and pursuing acquisitions focused on value-based care and Optum Insight innovation.

About UnitedHealth Group (NYSE:UNH)

UnitedHealth Group Incorporated is a diversified health care and well-being company headquartered in Minnetonka, Minnesota. Its operations are organized primarily through two businesses: UnitedHealthcare, which provides health benefit plans and services, and Optum, which delivers health care services, technology, pharmacy care and data-driven solutions.

UnitedHealthcare serves individuals, employers, government programs and other organizations through products that include employer-sponsored health plans, individual and family coverage, Medicare and Medicaid plans, dental and vision benefits, and related administrative services.

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