UnitedHealth Group signage on the floor of the New York Stock Exchange on April 21, 2025.
Michael Nagle | Bloomberg | Getty Images
UnitedHealth Group reported third-quarter results Tuesday that beat past estimates and raised its full-year profit outlook, as the company continues to navigate high medical costs and sees investments in value-based care and artificial intelligence come to fruition.
The nation’s largest private insurer said it expects adjusted earnings of at least $20.50 per share for fiscal 2026, up from previous guidance of $19.50 to $20 per share.
The healthcare giant’s recovery plan is gaining momentum after three consecutive good quarters this year. UnitedHealth is working to stabilize its margins by reducing its membership, terminating unprofitable contracts and increasing investments in artificial intelligence and value-based care, which ties physician and facility compensation to patient health outcomes, quality of care and profitability rather than the volume of medical services provided.
“You’ll see during the quarter that we continue to execute not only on the financial aspects of our business, but we actually do 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.
The company’s shares rose about 3% in premarket trading.
Here’s what the company reported for the third quarter compared to what Wall Street expected, based on a survey of analysts by LSEG:
- Earnings per share: $4.69 adjusted vs. $4.14 expected
- Income: $112.69 billion versus $111.40 billion expected
The company reported net income of $4.11 billion, or $4.56 per share, in the third quarter, compared with $2.35 billion, or $2.59 per share, for the same period last year. Excluding items such as business divestitures, restructurings and an expected reduction in reserves for unprofitable contracts, UnitedHealth earned $4.69 per share.
Revenue fell to $112.69 billion from $113.16 billion in the year-ago quarter. The company’s insurer, UnitedHealthcare, and its healthcare unit Optum both beat analysts’ operating profit estimates for the quarter, according to StreetAccount.
Managing high costs
Notably, UnitedHealth’s medical expense ratio – a measure of total medical costs paid compared to premiums collected – stood at 88.4% for the third quarter. Analysts expected a ratio of 89.9% for the quarter, according to StreetAccount. A lower ratio generally 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 high by historical standards” — a problem that has plagued insurers, particularly those operating private Medicare Advantage plans, for more than two years.
“I think it’s something we should monitor. I think you’ll see that our medical care ratio has improved significantly, 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 adds at least 100 basis points, or 1 percentage point, to total medical costs. This 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 regarding out-of-network payments. DeVeydt said these changes drive 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 expensive specialty pharmaceutical drugs for cancer and rare diseases, remain high.
Still, he highlighted the company’s efforts in value-based care, which helps control medical costs by directing patients to 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 care admissions increased 10%, suggesting more patients are receiving care in less expensive settings.
“You’re seeing more and more members are getting into a lower-cost care environment, but more importantly, they’re getting into the care environment that they actually want to be in,” he told CNBC. “So we think we’re really balancing quality and cost.”
UnitedHealth is also deploying AI-powered ambient listening tools to reduce administrative burden on physicians and free up time for patient visits. Appointment scheduling done by patients rather than with the help of a provider increased 27% year over year, DeVeydt said.
He expects these initiatives to have a cumulative effect on medical cost management through the fourth quarter and into 2027 as the programs expand.
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