💰 Market Cap: $331B | 🏢 400K Employees | 🌍 50.1M US Members, 51M+ Global

👨‍💼 CEO Stephen Hemsley | 🎯 Margin Growth 2026, Double-Digit Growth 2027+ | 🇺🇸 Eden Prairie, MN

$366.75

📈 +$0.77 (+0.21%) Today

-27.6% YTD | Post-Q3 2025 Earnings

🚀 Needs:

Medicare Advantage margins reach upper half of 2-4% target range by 2027 • 2026 repricing (10% trend assumption) successfully offsets elevated costs • Commercial returns to normal margin range in 2027 after 60% of book repriced • Medicaid rate adequacy improves as states increase funding • Optum Health operational improvements drive 5-6% margins in 2026, 6-8% long-term • Provider coding/billing pressures stabilize through network actions and AI payment integrity • CMS maintains receptive posture on Medicare Advantage modernization under new administration

⚖️ Needs:

Management delivers "solid earnings growth" in 2026 per guidance • Medicare membership decline stays at ~1M (individual + group MA combined) • ACA enrollment contracts by ~66% but margins improve on 25%+ rate increases • MedSupp trend moderates from >11% to sub-10% levels • Commercial group fully insured contracts but self-funded grows strongly • Medicaid remains challenged in 2026 but doesn't deteriorate further • Early AEP results continue to track in line with strategic positioning • STARS improvements for 2028 performance year materialize

⚠️ Risk:

Provider coding/billing practices accelerate beyond 10% trend assumption (higher DRGs, service intensity per encounter, specialist rounding) • Medicare membership losses exceed 1M as competitive dynamics worsen • Medicaid margins decline further below breakeven as states fail to fund adequately • ACA service area reductions trigger regulatory pushback or market disruption • Commercial repricing drives more attrition than expected in group fully insured • Optum Health value-based care business shows "more measured progress" delaying margin recovery to 2027-28 • Network actions to address cost outliers alienate key provider relationships

💰

What Happened

REVENUE: $113.2B, up 12% YoY, beat estimate of $113.04B

ADJUSTED EPS: $2.92 vs $2.81 estimate (+3.9% beat), GAAP EPS $2.59

MEDICARE TREND: 7.5% full-year 2025 in MA, MedSupp >11%, in line with Q2 guidance

REPRICING PROGRESS: 60% of commercial group insured repriced for 2026, Medicare/ACA substantially complete

MEMBER SERVICE: 85% digital inquiries, 90% calls answered <30 seconds, 95% claims auto-processed

📈

Why It Matters

AGGRESSIVE REPRICING WORKING: Medicare priced for 10% trend vs 7.5% actual gives margin cushion, positions UHC for "solid operating earnings growth" in 2026

MANAGEMENT REALISM: Hemsley acknowledges "pressure we experienced is largely result of mispricing and suboptimal market positioning"—no sugarcoating

CMS RECEPTIVITY IMPROVED: "Encouraged by receptivity of this administration" vs "direct contrast to previous administration"—tailwind for MA modernization

PROVIDER COST DRIVERS IDENTIFIED: Higher DRG coding, specialist rounding, service intensity—UNH deploying AI payment integrity and network actions

DOUBLE-DIGIT GROWTH TIMELINE: "Solid earnings growth" 2026, then "sustainable double-digit growth beginning 2027"—clear recovery roadmap

🎯

What's Next

MEDICARE STRATEGY: Expect ~1M member decline (individual + group MA), benefit cuts, network reductions to drive margins toward 2-4% target range upper half by 2027

ACA RIGHTSIZING: 25%+ rate increases submitted, ~66% enrollment reduction expected, targeted service area exits where rates unsustainable

MEDICAID CHALLENGES PERSIST: Breakeven margins 2025, negative margins likely 2026 unless states fund adequately—"path to recovery will be more challenging"

COMMERCIAL RECOVERY: Group fully insured expected to contract but self-funded strong, return to normal margins in 2027 after repricing complete

OPTUM HEALTH TIMELINE: "More measured progress in 2026," longer timeline to bear fruit—narrowing networks, refocusing on mission, scaling value-based care

💡

Bottom Line for Retail Investors

The transcript reveals a management team that's clear-eyed about what went wrong (mispricing) and exactly how they're fixing it (aggressive repricing, network actions, plan exits). Key takeaway: UNH priced 2026 Medicare for 10% trend while only seeing 7.5% actual—that built-in cushion should deliver the margin recovery they're promising. Two-week AEP results "in line with strategic positioning" suggests the ~1M member decline won't be worse than planned. The wildcard is Medicaid (going negative in 2026) and Optum Health's "measured progress" means that business won't help 2026 earnings much. If you believe Hemsley can execute the turnaround playbook—and his 2006-17 CEO track record suggests he can—this is your entry point. If provider cost trends accelerate beyond 10% or states don't fund Medicaid properly, this trades lower before it trades higher.

💪

Repricing Playbook Working

10% TREND ASSUMPTION VS 7.5% ACTUAL: Built-in margin cushion for Medicare 2026, "trend experience validates actuarial forecasts underpinning pricing actions"

CLEAR PATH TO MARGIN GROWTH: "Repricing within UHC on track to drive solid operating earnings growth from margin improvement in 2026" per Hemsley

PORTFOLIO RATIONALIZATION COMPLETE: Medicare, ACA, and 60% commercial repriced—"each business on clear path towards margin growth in 2026"

AEP TRACKING TO PLAN: "Early results in line with strategic positioning for 2026" means no nasty surprises two weeks into enrollment period

🏛️

Political Tailwinds Emerging

CMS RECEPTIVITY IMPROVED: "Encouraged by receptivity of this administration...in direct contrast to previous administration"—easier regulatory environment

FACT-BASED CONVERSATIONS: New admin willing to discuss "ways to modernize and improve" Medicare Advantage vs previous hostility

$50B MEDICARE CUTS ENDING: Third year of "industry-wide Medicare cuts by previous administration" flowing through 2026, then eases

STARS IMPROVEMENT: "Recent Medicare STARS score showing improvement year over year"—critical for 2028 payment year, intense focus continues

🤖

AI Deployment Scaling Fast

PAYMENT INTEGRITY AI: "Making more use of AI in payment integrity programs" to combat provider coding/billing practices—directly attacks cost trend

OPERATIONAL EFFICIENCY: "Aggressively scaling AI and machine learning to enhance experiences and optimize core performance" across UHC

MEMBER SERVICE METRICS: 85% digital inquiries, 90% calls <30 sec, 95% auto-processed claims, 95% first-call resolution—world-class operations

COST OUTLIER IDENTIFICATION: Using AI to identify "significant outliers" in provider billing—network actions to address, preserve affordability

📈

2027+ Growth Acceleration Clear

HEMSLEY ROADMAP: "Balance earnings growth ambitions in 2026 with investments that will drive higher and sustainable double-digit growth beginning 2027"

COMMERCIAL NORMALIZES 2027: "Expect vast majority of employer insurance businesses repriced for 2026 and to return to normal margin range in 2027"

MEDICARE MARGIN TARGET: Plan actions "will position us to reach upper half of our 2-4% targeted margin range" by 2027—moving from crisis to target

LEADERSHIP STABILITY: New CFO Wayne DeWitt "has right experience, values, expertise"—Hemsley building team for 2027+ acceleration

📊

Provider Cost Pressures Intensifying

AGGRESSIVE PROVIDER CODING: "Meaningful portion related to more service intensity per encounter"—higher DRGs, more specialists rounding per stay

SITE OF SERVICE GAMING: "Higher cost sites of service where lower costs available" for labs, surgery—providers optimizing billing

HAPPENING NATIONWIDE: "Fairly consistently across country but also have significant outliers"—systemic problem, not isolated incidents

NETWORK ACTION RISKS: "Taking network actions where we need to keep healthcare affordable" could alienate key providers, reduce access

🏥

Medicaid Becoming A Drag

PATH "MORE CHALLENGING": Noel admits Medicaid "path to recovery will be more challenging" than other segments

BREAKEVEN 2025, NEGATIVE 2026: "Anticipate Medicaid margins will be breakeven for 2025...expect margins to decline further" in 2026

STATE FUNDING INADEQUATE: "States have not funded in line with actual cost trends"—political problem UNH can't control

MISMATCH EXTENDS THROUGH 2026: "Mismatch between rate adequacy and member acuity will likely extend through 2026"—no quick fix

⏱️

Optum Health Recovery Slow

"MORE MEASURED PROGRESS": Hemsley explicitly says Optum Health/Insight "will show more measured progress in 2026 and will take more time to fully bear fruit"

LESS MATURE BUSINESSES: Called "less mature businesses" vs UHC—implies longer runway to profitability, more execution risk

VALUE-BASED CARE CHALLENGES: Conway refocusing business, narrowing networks—suggests prior strategy wasn't working, reset needed

INVESTMENT REQUIRED: "Efforts to improve operations and make needed investments"—means Optum won't contribute materially to 2026 earnings growth

📉

Membership Hemorrhage Risks

~1M MEDICARE MA LOSS CONFIRMED: "Expect membership contraction of approximately 1M members in total MA including individual and group"—massive scale loss

ACA ENROLLMENT -66%: "Reducing our ACA enrollment by approximately two-thirds"—walking away from major market segment

COMMERCIAL FULLY INSURED CONTRACTING: "Expect group fully insured business to contract in line with broader market"—losing share in core business

COMPETITIVE DYNAMICS: Membership losses "as result of our plan actions, as well as competitive market dynamics"—competitors capitalizing on UNH's weakness