UnitedHealth Leaders Expect MA Costs Will Rise 10% in ’26
Rising Medicare Advantage costs that have put pressure on several big-name insurance companies this year are likely to climb another 10 percent in 2026, executives of UnitedHealth Group Inc. said on July 29.
Speaking after they reported United’s second-quarter results, CEO Stephen Hemsley and other executives said the finances of their insurance operations have been disrupted by what UnitedHealthcare CEO Tim Noel called “a marked increase in health care cost due in part to increases in service intensity per encounter.” The United team had forecasted that Medicare Advantage medical costs would rise a little more than 5 percent this year when it submitted its bids last year but is now forecasting that MA costs will finish 2025 having risen about 7.5 percent—and then accelerate next year.
Similar increases are apparent in other lines of United’s business: Noel said commercial plan members’ costs are rising faster than expected, particularly for outpatient care. For fully insured group plans, 2025 increases are nearing 11 percent, he said, which is about a percentage point higher than expectations. And for behavioral care under Medicaid plans, costs are up by 20 percent this year. In all, United’s second-quarter medical care ratio rose to 89.4 percent, which was more than 4 percentage points higher than both Q1 and the prior-year period.
As peers at other payers have said they’ll do, United executives plan to raise premiums and trim benefits for 2026 and beyond—Noel used the phrase “strongly responsive pricing”—as well as narrow some of their provider networks and ramp up their audits of payments and their use of artificial intelligence to cut costs.
“Taken together, this work is helping restore our operational muscle and reclaiming executional rigor, helped by modern tools and driven by a relentless focus on improvement,” Noel said.
Also in the works are retreats from several Medicare Advantage plans that combined have more than 600,000 members and a look at doing the same in some of the 30 Health Insurance Marketplace states where it operates. Looking ahead to the likely expiration of some tax credits for exchange plan members, Noel said enrollment will fall but added that United will be careful not to have its plans become riskier because they are home to more higher-risk patients.
“We will approach them far more conservatively for 2026,” Noel said of the exchange markets. “We may need to make the difficult decision to exit select markets if we are unable to achieve the rates necessary for higher market-wide morbidity.”
Executives delivered their cost comments and outlook after reporting second-quarter earnings of $5.2 billion on revenues of more than $111 billion. The top line was up from $98.9 billion in the same period of last year but profits were down from $7.9 billion. Hemsley and his team have lowered their outlook for the year in response: After pulling guidance in May, they now expect United to produce adjusted profits of at least $16 per share, well below the roughly $26 per share they had expected in April—which was itself cut from January’s nearly $30 per share. A return to the company’s historic profit growth rate will take until 2027, Hemsley said; next year is about shoring up the foundation and beginning to grow again after the step back this year.
Shares of United (Ticker: UNH) fell more than 7 percent to about $261 after executives’ earnings report and conference call. They have now lost more than half of their value over the past six months, a slide that has cut the company’s market capitalization to about $235 billion.
About the Author
Geert De Lombaerde
A native of Belgium, Geert De Lombaerde has more than two decades of business journalism experience and writes about markets and economic trends for Endeavor Business Media publications Healthcare Innovation, IndustryWeek, FleetOwner, Oil & Gas Journal and T&D World. With a degree in journalism from the University of Missouri, he began his reporting career at the Business Courier in Cincinnati and later was managing editor and editor of the Nashville Business Journal. Most recently, he oversaw the online and print products of the Nashville Post for more than a decade and reported primarily on Middle Tennessee’s finance sector as well as many of its publicly traded companies.