UnitedHealth raises profit outlook again as Medicare cost turnaround builds

UnitedHealth Group reported third-quarter earnings on Tuesday that beat Wall Street's forecasts on every major line and raised its full-year profit guidance for the second consecutive quarter, the clearest sign yet that the country's largest health insurer is pulling out of the Medicare cost crisis that wiped out a large share of its market value last year and forced out its chief executive. Shares rose in premarket trading, according to GuruFocus, as investors weighed evidence that the pricing and cost-control overhaul ordered by returning chief executive Stephen Hemsley is taking hold.

The company's own earnings release, filed with the Securities and Exchange Commission, shows net earnings of $4.3 billion for the quarter, up from $2.5 billion a year earlier, on revenue of $112.7 billion. Adjusted earnings per share came in at $4.69, comfortably ahead of the roughly $4.12 to $4.14 that analysts had been expecting.

The numbers

The single most closely watched figure, the medical care ratio, the share of premium revenue UnitedHealth pays out in medical claims, fell to 88.4 percent from 89.9 percent a year earlier, according to the earnings release filed on Form 8-K. That improvement, which included $610 million of favorable adjustments to prior-period reserves, is what let the company raise its full-year adjusted earnings guidance to "at least $20.50" a share, up from the $19.50-to-$20.00 range it had set over the summer. Diluted earnings per share for the quarter were $4.56, more than double the $2.59 posted in the third quarter of 2025.

Both of the company's main divisions actually took in less revenue than a year earlier: UnitedHealthcare's revenue slipped to $86.3 billion from $87.1 billion, and the Optum health-services arm fell to $66.9 billion from $69.2 billion. Yet operating earnings at both rose sharply, UnitedHealthcare's to $2.8 billion from $1.8 billion and Optum's to $3.7 billion from $2.5 billion, because the company has been deliberately shedding less-profitable Medicare Advantage enrollees and employer accounts rather than chasing volume. The number of people served through Medicare Advantage, including complex Medicaid populations, is down 935,000 since the end of 2025, part of an underwriting reset the company began after last year's cost overruns.

How a crisis year turned into a comeback

A year ago, UnitedHealth was in free fall. The company cut its 2025 profit outlook in April 2025 after Medicare Advantage patients, particularly newer enrollees, used far more care than its actuaries had priced for. Weeks later, on May 13, 2025, the board suspended that guidance altogether and announced that Andrew Witty had stepped down "for personal reasons," with Hemsley, who had already run the company from 2006 to 2017, returning as chief executive. The press release accompanying that announcement, filed with the SEC, quoted Hemsley saying the board intended to pursue a "return to our long-term growth objective of 13 to 16 percent" once the near-term cost problems were brought under control. The stock fell as much as 20 percent in a single session, its steepest one-day drop in decades, and within days the Wall Street Journal reported that the Justice Department was pursuing both civil and criminal inquiries into the company's Medicare Advantage billing practices, a report that knocked the shares down by a further double-digit percentage. UnitedHealth has said it is cooperating with federal requests for information; neither it nor any executive has been charged with wrongdoing.

The recovery since then has leaned heavily on repricing Medicare Advantage plans and on a friendlier federal rate environment. In April 2026, the Centers for Medicare & Medicaid Services finalized a 2027 Medicare Advantage payment increase of 2.48 percent, worth more than $13 billion industrywide, well above the 0.09 percent the agency had floated in its January advance notice. Preliminary 2027 Medicare Advantage Star ratings data released by CMS on October 8 showed at least 69 percent of UnitedHealth's members in plans rated four stars or higher, a threshold that determines quality bonus payments; the company's own Q3 release called that result "in line with expectations," a marked change from the ratings slippage that had worried investors in prior cycles.

Who is affected

The clearest winners are UnitedHealth's shareholders, who had watched the stock lose more than 40 percent of its value from its November 2024 high before this year's recovery began. The clearest losers, at least in membership terms, are some of the roughly one million Medicare Advantage enrollees UnitedHealthcare has stopped covering or priced out of its plans since the start of the year, along with 165,000 employer-plan members and 85,000 Medicaid beneficiaries the company lost to attrition and eligibility changes. For competitors such as Humana, CVS Health's Aetna and Elevance Health, a UnitedHealth that is once again pricing Medicare Advantage conservatively, rather than growing aggressively, changes the competitive dynamics of the country's largest health-insurance market, in which roughly half of Medicare's more than 60 million beneficiaries are now enrolled in privately run plans. UnitedHealth shares are often treated as a bellwether for the sector, and rival insurers' stocks have tended to track its results this earnings season as investors try to gauge whether the industry-wide Medicare Advantage cost pressures of 2025 are genuinely easing or merely being managed around.

The Medicare billing inquiries are not the only federal scrutiny the company is managing. A separate Justice Department antitrust review, opened in 2024, has been examining the relationship between UnitedHealthcare and Optum, the arm that now employs or affiliates with tens of thousands of physicians and runs one of the country's largest pharmacy-benefit managers; that inquiry sits apart from the Medicare Advantage billing probes but adds to the list of regulatory questions hanging over the company's integrated model even as its reported numbers improve.

"Our third quarter results reflect the discipline and execution our teams are bringing to every part of our business," Stephen Hemsley, UnitedHealth's chief executive, said in the company's earnings statement.

What happens next

The Justice Department's investigations remain the biggest unresolved overhang on the stock; the company's quarterly filings continue to disclose that it is responding to federal requests for information without any indication of when, or how, the matters will be resolved. On the operating side, management's focus now shifts to the 2027 enrollment season, when Medicare beneficiaries choose plans for the year the improved CMS rates and star ratings take effect, and to proving that this quarter's cost discipline can be sustained rather than reflecting one-off reserve releases. UnitedHealth's full third-quarter results and the accompanying investor call, in which Hemsley and chief financial officer Wayne DeVeydt discussed the outlook in more detail, are part of the public record filed with the SEC; the company's next scheduled update, its fourth-quarter and full-year report, will show whether the turnaround management has promised for 2026 as a whole is holding up through the final months of the year.