UnitedHealth Group has reported third-quarter earnings that significantly exceeded expectations, prompting the company to raise its full-year profit outlook. The healthcare giant, the largest private insurer in the United States, announced on Tuesday that it anticipates fiscal 2026 adjusted earnings of at least $20.50 per share, an increase from its previous forecast of $19.50 to $20 per share.
The company's strategy to manage high medical costs appears to be paying off, with investments in value-based care and artificial intelligence beginning to show results. UnitedHealth is focusing on stabilizing margins by reducing membership, exiting unprofitable contracts, and increasing investments in innovative care models. These models tie compensation to patient health outcomes and cost-effectiveness rather than the volume of services provided.
Chief Financial Officer Wayne DeVeydt emphasized the company's commitment to a simpler, more focused approach in an interview. He noted that UnitedHealth is heavily investing in value-based care, which is reflected in the company's financial performance. Shares of UnitedHealth rose approximately 3% in premarket trading following the announcement.
For the third quarter, UnitedHealth reported a net income of $4.11 billion, or $4.56 per share, compared to $2.35 billion, or $2.59 per share, during the same period last year. Excluding certain items such as business divestitures and restructuring, the company earned $4.69 per share. Revenue for the quarter fell slightly to $112.69 billion from $113.16 billion in the previous year.
Both UnitedHealthcare, the company's insurance arm, and its Optum healthcare unit surpassed analysts' operating earnings estimates for the quarter. The medical cost ratio, which measures total medical expenses paid relative to premiums collected, stood at 88.4% for the third quarter. This was better than the 89.9% ratio anticipated by analysts, indicating higher profitability as the company collected more in premiums than it paid out in benefits.
Despite these positive results, DeVeydt cautioned that medical costs remain elevated compared to historical norms. This issue has particularly affected insurers operating Medicare Advantage plans for over two years. He pointed out that the independent dispute resolution (IDR) process under the No Surprises Act is adding at least 1 percentage point to total medical costs. This federal law, effective since 2022, aims to protect consumers from unexpected medical bills by allowing providers and insurers to resolve out-of-network payment disputes.
DeVeydt explained that these changes are driving up claims costs, which could ultimately lead to higher premiums for consumers. He also noted that costs for inpatient services and specialty pharmacy drugs for cancer and rare diseases remain high. However, he highlighted the company's efforts in value-based care, which are helping to control medical costs by directing patients to appropriate providers and emphasizing preventive care.
Acute hospital admissions among UnitedHealth members decreased by 15% year over year through the third quarter, while home health admissions rose by 10%. This suggests that more patients are receiving care in lower-cost settings. DeVeydt remarked that members are increasingly accessing care environments they prefer, balancing both quality and cost.
UnitedHealth is also deploying AI-powered ambient listening tools to alleviate physicians' administrative burdens, allowing more time for patient visits. Appointment scheduling by patients increased by 27% year over year, according to DeVeydt. He anticipates these initiatives will have a cumulative effect on managing medical costs through the fourth quarter and into 2027 as the programs expand.
