UnitedHealth hiking rates, plans to shed 1M members in ’26 as profits rise

As CEO Stephen Hemsley nears six months back in control of UnitedHealth Group, the health insurance giant is executing the financial turnaround he promised.

UnitedHealth is doing it via hard choices and hiking rates.

“[W]e've repriced the vast majority of our UHC risk businesses, including Medicare Advantage and to varying degrees, our commercial, fully insured and residual ACA offerings,” said Tim Noel, CEO of UnitedHealthcare.

Those hard choices will continue in 2026. UHC expects to drop one million members in Medicare Advantage, Noel said, including individual and group markets.

The health insurer expects to shed two-thirds of its Affordable Care Act enrollment after raising rates more than 25% in the 30 states it offers ACA plans, Noel said.

“Where we are unable to reach agreement on sustainable [ACA] rates, we are enacting targeted service area reductions,” Noel said. “We believe these actions will establish a sustainable premium base.”

UHG surprised investors and analysts with a strong third-quarter profit margin, which prompted the company to increase its earnings outlook for the year.

It has been a tumultuous year for the health insurer. Former UnitedHealthcare CEO Brian Thompson was killed in December while on his way to a New York City investor conference.

In the first quarter, UHG missed its first earnings guidance since 2008. The insurer parted ways with its former CEO, Andrew Witty and abandoned its earnings guidance on May 12. Hemsley, who led UHG for more than a decade before assuming a board role in August 2017, returned on a three-year contract.

"We're getting at the core of the underperformance issues with fresh perspectives, intent on positioning our organization as a positive and innovative leader, helping to advance next era of healthcare," Hemsley said. "I'm confident we will return to solid earnings growth next year, given the operational rigor and more prudent pricing."

In Other News

Medicaid challenge. UnitedHealth Group boasts more than 50 million health plan subscribers under its UnitedHealthcare health insurance business. It is seeing rising costs across Medicaid, Medicare Advantage, and individual coverage under the ACA, Noel noted.

Of those, he called Medicaid "most challenging." Major cuts to Medicaid funding and eligibility changes resulting from the 2025 One Big Beautiful Bill Act are significantly impacting the program. These changes come after the end of the COVID-19 program expansion and a period of massive enrollment increases.

UHG executives blamed states and the Biden administration for rising costs in public health programs, but steered clear of any criticism of the Trump administration.

"States have not funded [Medicaid] in line with actual cost trends, so funding levels are not sufficient to cover the health needs of state enrollees," Noel said. "While we're making steady progress and bridging this gap with states, the mismatch between rate adequacy and member acuity will likely extend through 2026."

UHG executives will continue to push states for increased Medicaid funding, Noel added. Executives did not mention Congress, which is in a federal government shutdown over the future of health insurance spending.

Artificial intelligence. Sundeep Dadlani, who was named CEO of UHG's Optum Insight division in September, spoke about a new AI initiative UnitedHealth is pursuing.

The company unveiled Optum Real, a new AI-powered claims processing tool, during a conference last week. The platform uses Al for clinical and financial support throughout the claims and reimbursement process, letting providers know in real time what's covered and ensuring payers receive more complete claims data, UHG has said.

Optum Real is in the midst of a pilot trial with UnitedHealthcare on the payer side as well as with Allina Health, a health system operating 12 hospitals across Minnesota and Wisconsin, for outpatient radiology and cardiology claims. Allina has seen a reduction in administrative errors under the pilot as well as a better patient experience in the more than 5,000 visits processed.

"This is the first real-time platform for claims and reimbursements anywhere in the industry, and just our early pilots are showing dramatic results in streamlining what I think is one of the most complex pain points for payers and providers," Dadlani said.

Quarterly Snapshot

• Optum revenues grew 8% year-over-year to $69.2 billion, driven by growth in Optum Rx.
• Raising full-year 2025 earnings outlook to at least $14.90 per share, up from $14.65.
• Adjusted earnings projection raised to at least $16.25 per share, up from $16.
• UnitedHealthcare’s third-quarter 2025 earnings from operations were $1.8 billion, compared to $4.2 billion in Q3 2024.

Management Perspective

"We delivered revenues of over $113 billion, reflecting 12% year-over-year growth, growth driven by domestic membership expansion of over 780,000 lives. Year-to-date, we ended the third quarter with a total domestic membership of more than 50 million."

Chief Financial Officer Wayne S. DeVeydt, in his first meeting since succeeding John F. Rex on Sept. 2.

By The Numbers

• Total Revenue: $113.2 billion ($100.8 billion in Q3 2024)
• Net Earnings: $2.5 billion ($6.3 billion in Q3 2024)
• Medical Loss Ratio: 89.9% (85.2 in Q3 2024)
• Earnings Per Share: Adjusted earnings per share of $2.92 ($7.15 in Q3 2024)
• Share Repurchases: Paused until 2026
• Dividend Declared: $2.21 per share
• Stock Price Movement: Shares up 2.3% at midday Tuesday to $374.42

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InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.