Zhitong Finance App learned that United Health (UNH.US) announced financial results for the third quarter and held a results conference call.
UnitedHealth's third-quarter results continued to recover, and management reaffirmed confidence in long-term growth. Chairman and CEO Steve Hemsley said in his opening statement that the third-quarter performance reflected that the actions taken by the company throughout 2026 were bearing fruit and reaffirmed the long-term growth target range of 13% to 16%; the company raised its adjusted earnings per share guidance for the full year 2026 to “at least $20.50.” He focused on progress in the implementation of AI and modern intelligent infrastructure: AI medical record summaries have covered more than 40% of our own doctors, medical record review time has been reduced by 33%, AI information collection and research has shortened the complaint processing cycle by 26%; according to the plan, all pre-authorization reforms will be implemented by the end of the year, and the total amount will be reduced by 30%, of which the number of people under 18 will be reduced by two-thirds. The UnitedHealth Foundation has so far committed $1 billion to focus on rural healthcare, maternal and child health, behavioral health, and workforce education. Chief Financial Officer Wayne Devitt reported third-quarter revenue of $113 billion, adjusted earnings per share of $4.69 ($2.92 in the same period last year), comprehensive healthcare payout ratio of 88.4% (89.9% in the same period last year); debt-to-capital ratio of 41.7%, which will be close to 40% by the end of the year; 5 billion US dollars of shares have been repurchased during the year, and dividends of 6.2 billion US dollars are expected to exceed $8 billion by the end of the year. He believes that the current consensus Wall Street forecast for 2027 may be underestimating the opportunity, and the lower limit of 13% of the long-term growth range is a more reasonable starting point. By sector, the company says Medicare's profit margin will be close to the upper end of the 2% to 4% range. Medicaid's core profit margin is slightly better than -1%. 2026 is seen as a trough year. The commercial insurance medical trend is still above 11%, while Optum Health maintains the goal of reaching the 6% to 8% profit margin range in 2028.
The Q&A session focused on healthcare cost trends and the pace of profit margin repair for businesses in various regions. On the Medicaid side, the company says membership and disease severity are in line with expectations, and full-year performance will be slightly better than previously anticipated, driven by complex care cost management, internet and service selection, AI-enabled counselling, and anti-fraud. However, behavioral health, specialty pharmacies, home and community services, and hospitalization costs are still high, and the goal is to return to a reasonable profit margin level by 2028; Medicare Advantage profit margins are now expected to approach the upper end of the 2% to 4% range. In terms of growth in 2027, the company does not provide official membership guidelines yet, but it says that its footprint has expanded year over year, and that more than 94% of Medicare eligible people can choose its plan, focusing on dual special needs plans (D-SNP), chronic special needs plans (C-SNP), and high-value HMO; commercial insurance accounts are strong nationwide; drug benefit management (PBM) retention remains in the high 90% range, and the proportion of external members has exceeded 50%. Optum Health said it will advance strongly towards the profit margin target of 6% to 8% in 2028, with growth points including the expansion of full liability relationships, service lines such as home and hospice care, and post-acute full-cycle risk products; Optum Insight said 2026 is a construction year, and the number of customers for the AI product Optum Integrity One has increased from 2 to 15 customers, implemented another 24, and joined the Anthropic partner network. Furthermore, the company claims that the time for achieving long-term profit margin targets for commercial insurance will be extended; management clearly denies that medical trends are accelerating, indicating that government business trends are slowing down, commercial insurance is stabilizing, and that forward-looking pricing has been incorporated into more real-time usage rate data.
The market is most concerned about the four lines. The first is whether the medical cost trend has peaked: the company admits that costs are “still stubbornly high”, especially in specialty pharmacies and acute services. The commercial insurance trend is higher than 11%, but it clearly denies that the trend is accelerating, saying that government business is slowing down and commercial insurance is stabilizing. The second is Medicare Advantage's pricing and 2027 growth: the annual enrollment period begins this week. The company chose to prioritize high-value HMOs and special needs plans, and respond to the trend by “stabilizing products without aggressive expansion.” The third is policy and regulatory pressure: the independent dispute resolution mechanism of the “No Accidental Medical Bills Act” has been misused by some doctors' groups and third party agencies, and arbitration payments in some regions are close to 6% of total medical expenses; the company said it supports the original purpose of the bill, but opposes arbitration results and process costs, and also expressed support for CMS's modernization of quality programs and Medicare. The fourth is the profit margin repair path and return on capital: Medicaid aims to return to a reasonable level in 2028, Optum Health aims to enter the 6% to 8% range in 2028, and the long-term profit margin target for commercial insurance will be extended; capital companies maintain $5 billion in repurchases and continuously increasing dividends. In terms of star ratings, the company said that almost every HEDIS and Rx index in the initial rating for the 2028 payment year achieved year-on-year improvements, and the proportion of members with 4 stars and above is close to 75% (industry average of about 70%).
Presentation session
presenter
Good morning, and welcome to UnitedHealth Group's Q3 2026 results conference call. [Host Reminder] This meeting will be recorded.
Here are some important opening messages. This session contains forward-looking statements under the US federal securities laws. These statements are subject to risk and uncertainty, and may cause actual results to differ materially from historical experience or current expectations. Some of the risks and uncertainties can be found in our filings with the U.S. Securities and Exchange Commission, including the cautionary statements contained in our current and periodic filings.
This session will also cite non-GAAP data. A reconciliation table between non-GAAP data and GAAP data can be found in the “Financial and Performance Report” section of the company's investor relations page at www.unitedhealthgroup.com. The information presented at this conference, included in our earnings press release issued this morning and Form 8-K dated October 13, 2026, can all be obtained from the investor relations page on the company's website.
I now entrust the meeting to UnitedHealth Group Chairman and CEO Steve Hemsley.
Stephen Hemsley - Chief Executive Officer and Non-Independent Non-Executive Chairman
Good morning and thank you all for attending today. Our performance in the third quarter reflects actions taken throughout 2026, brought about tangible progress, and strengthened our confidence that we can achieve sustainable growth in 2027 and beyond within our long-term target growth range of 13% to 16%. Our revised guidance for the full year 2026 reflects continued improvements in leadership and execution between Optum and UnitedHealthcare, and we are better aligning our businesses to meet the needs of the changing US healthcare environment. We're accelerating enterprise modernization: promoting simpler, more responsive policies, processes, and tools, focusing on more effective and integrated value-oriented healthcare solutions, and building modern smart infrastructure in a responsible manner to enable people to receive higher quality medical services at lower costs, while allowing clinicians to experience simpler, faster, and more supportive systems.
In various business lines, AI-enabled capabilities have begun to help clinicians spend more time with patients, improve service speed and experience, simplify administrative processes, and reduce friction between consumers and clinicians. Here are a few examples. We've expanded AI medical record summaries to over 40% of our own physicians, reducing medical record review time by 33%. AI-driven information collection and research have reduced complaint processing cycles by 26% and improved the member and clinician experience, and we expect this effect to accelerate in 2027. And during this year's Medicare Advantage annual enrolment period, we launched AI-driven plan recommendations to help members simplify their choices by using their care history and local plan options.
By the end of this year, we will implement all previously announced pre-authorization reforms as planned to shorten decision-making time for patients, reduce administrative burdens for clinicians, and bring a better experience to people. Together, these measures will reduce the total amount of prior authorization by 30%, of which pre-authorization for people under 18 will be reduced by two-thirds. These efforts are just the beginning, and there will be more to come. They are at the core of how we transform our business to better suit our mission, create greater value and positive social impact.
One important work in this regard is the reimagined UnitedHealth Foundation. The Foundation has so far committed $1 billion, and its investment, along with UnitedHealthcare and Optum's dedicated operational expertise, can help drive large-scale programs to address some of the biggest challenges facing the US healthcare system, including rural health, maternal and child health, behavioral health, and workforce education. To name just one example, in Tennessee, the Foundation is helping expand and operate health centers across the state to provide access to preventative care and chronic disease support to underserved communities. In the future, we will continue to introduce the Foundation's work in comments on the results conference call.
The broader healthcare environment is still full of changes. Policy-driven regulatory developments, changes in consumer expectations, and the rapid evolution of clinical care and technological advances continue to reshape the industry. These factors are squeezing basic affordability and accessibility with unprecedented strength. Success requires constant adaptation, and the pace is picking up. We recognize this and remain unsatisfied in our quest for change and improvement. We're challenging our own assumptions, revising our policies and practices, reconfiguring our leadership and capabilities to better meet the needs of our clients, and adapt more quickly to the changing healthcare landscape as a business. This includes better collaboration with clinical partners, employers, and government benefit sponsors to help improve the experience for all stakeholders in the healthcare system.
Our performance in 2026 has progressed. But we still have a lot of work to do to get closer to the full potential of our mission and make the positive impact we can have as a business. UnitedHealth has a long history of evolution and is always adapting to the changing needs of the US healthcare system. We promise to accelerate these efforts to make the enterprise stronger, more capable, and more mission-centered.
Next, I left the meeting to Tim Noel.
Timothy Noel - CEO of UnitedHealthcare
Thanks, Steve. UnitedHealthcare is seeing positive momentum in its Medicare and Medicaid businesses, while our commercial insurance business continues to adjust to a challenging yet steadily stabilizing environment. Costs in the medical sector as a whole remain stubbornly high, particularly in areas such as specialty pharmacies and the intensity of acute care services. We continue to address increasingly expensive healthcare challenges through proper healthcare management, operational discipline, and a commitment to identify and remove excess and unnecessary costs from our own businesses while advancing simpler and more modern services. We are working hard to provide stable benefits and value to our members and customers. We believe this will equip us for continued endogenous growth and long-term value creation as we enter 2027.
Starting with the Medicare business, the annual enrolment period will begin later this week. Medicare Advantage remains the choice for well over half of eligible American seniors because it offers better, more modern benefits and, importantly, better outcomes than pay-for-service Medicare. Beneficiaries who choose Medicare Advantage save an average of over $4,000 a year over those choosing traditional Medicare through lower premiums and cost sharing. With sufficient funding, we believe Medicare Advantage will continue to be the choice for America's seniors, especially those who are vulnerable, face chronic care challenges, and seek better value and modern healthcare.
As we enter 2026, we have made careful decisions about Medicare Advantage benefit design and market positioning to maintain the long-term sustainability and performance of our Medicare Advantage products. We continued this disciplinary practice in 2027. We believe in our competitive position and focus on creating value for the elderly in the markets we serve, while keeping an eye on changing trends. In 2027, UnitedHealthcare will continue to prioritize the development of high-value HMOs, chronic special needs programs, and dual special needs programs. Our commitment to serving America's seniors is clear. More than 94% of Medicare eligible people nationwide will be able to choose UnitedHealthcare's Medicare plan, and about 90% of Medicare eligible consumers can choose one of our Medicare Advantage plans that offer zero premium options.
We have preserved important benefits such as dentistry, vision, hearing, and other health and wellness, which have made a real difference in the lives of the elderly. In 2027, UnitedHealthcare's Chronic Special Needs Program will be open to nearly 50 million Medicare eligible people to provide dedicated support for patients with diabetes, cardiovascular disease, and chronic heart failure. These programs provide benefits and access to health services tailored to the unique needs of people managing chronic diseases to help them connect with the care, medication, and support they need.
Much of this work is done in collaboration with our partners at Optum Health. There is evidence that complex elderly patients with chronic diseases can receive better preventative care and improve health outcomes at a lower cost with integrated value-oriented health services. Medicare Advantage patients who participate in value-oriented care arrangements are 40% less likely than traditional Medicare patients to be hospitalized for acute and chronic conditions, and 40% less likely to be re-admitted within 30 days of discharge.
Next, let's talk about star ratings. Our initial star rating for the 2028 payment year reflects our investment in quality, member experience, and operational execution. As we move from 2027 to 2028, we expect 4 star plans and above will account for nearly 75% of total membership, compared to the industry average of 70%. Our team remains highly focused on creating first-class consumer and clinical experiences. Coupled with better benefit design and future stability, we believe these efforts will continue to translate into better quality performance. We will continue to support the work associated with the CMS Quality Program to ensure that the Medicare Advantage Program continues to provide quality experience and stability to the 36 million older people who depend on it.
Shift to health care costs. Our actions to improve and modernize care management, strengthen clinical participation, and improve operational discipline are having significant results. The intensity of care is still high compared to the historical norm, although we continue to see signs that the trend is changing in a more stable direction than recently. We remain in awe of the trend, not assuming that it will slow down from historical patterns or that the pricing pressure on clinicians will ease. Demand for medical care remains strong, especially among the elderly and complex, and we fully support members in obtaining appropriate medical services.
Switch to commercial insurance business. Performance continued to stabilize in dealing with a challenging market. As we previously indicated, the medical trend in commercial insurance has surpassed our initial expectations of 11%, driven by the acceleration of costs associated with the No-Accidental Medical Billing Act, higher cost intensity from clinicians, and high-value specialty drugs. Of particular concern is the continued misuse of the No-Accidental Medical Billing Act dispute resolution process by a relatively small number of physician groups and third parties.
In some regions, arbitration claims can be close to 6% of total health-care spending, which means consumers, employers, and health-care systems bear billions of dollars in excess costs. The original purpose of this law was to protect patients from unexpected bills, and we strongly support this goal. We will continue to work with policymakers and regulators to ensure that the law works as intended and that medical funding is used for proper patient care rather than vastly inflated market arbitration claims and arbitration amounts and unnecessary administrative expenses.
Medicaid remained stable in the second half of the year, and our team continued to drive operational improvements through online selection and more effective behavioral health program initiatives. To a certain extent, these actions have offset the impact of the main variable, and this variable is still the timing and degree of sufficiency of state government funding in various markets. We will continue to work with our state partners throughout the rest of 2026 to ensure that rates properly reflect the severity of illness and medical needs of the families we serve, including the impact of regulatory actions. Although many states have made progress, the timing of the update is uneven.
Based on our current outlook, we continue to view 2026 as the trough year for Medicaid's core profit margins, and now we expect it to be slightly better than -1%. Finally, we are making every effort to strengthen support and maintain relationships between clinicians and the healthcare system. In addition to the pre-licensing reforms mentioned by Steve — we think that's just the beginning — we're significantly speeding up claims processing and payments, and reorienting and revitalizing the maintenance of our relationships with physicians, and investing more dedicated resources and executive responsibility. Our goal is to provide a smoother experience and resolve issues faster for the clinicians and healthcare systems we work with.
Looking ahead to 2027 and beyond, we are shifting our focus to sustainable endogenous growth, supported by improved Medicare fundamentals, a stronger business insurance outlook, continued opportunities to improve Medicaid performance, and an organization that operates more responsibly and with all stakeholders.
Next, I handed over the meeting to Patrick.
Patrick Conway - CEO (Optum)
Thanks, Tim. Our third quarter results highlight the important work being carried out across Optum, which lays the foundation for long-term growth. Let's start with Optum Health. Overall, Optum Health continued to deliver strong performance in the third quarter, driven by a continued return to value-oriented medical principles, and strong execution of our clinical programs and operational improvements, which enabled clinicians to focus more on patients and improve the patient experience.
Here are a few examples this morning: online self-service appointments increased 27% compared to last year, making it easier for patients to reach clinicians; home health visits increased 10% compared to last year. We are very encouraged by the early results of the project to co-host behavioral health specialists in primary care clinics. The number of referred patients doubled compared to last year, and the participation rate was over 90%. As Tim said, today more than ever, we need to provide seamless care and coverage for our chronic and complex patients at every stage of the care continuum, from primary care to specialty, to home, to pharmacy.
Go to Optum Rx. Our focus in this business remains two jobs to ensure value alignment with the customers and patients we serve. First, we continue to improve Optum Rx's transparency in the PBM process. Throughout the 2027 sales season, our industry-first initiatives for affordability, experience, and transparency resonated with the market, and the customers we serve, employers, governments, and trade unions continue to acknowledge the critical role of PBM in controlling the cost of prescription drugs and ensuring people get the medicines they need, especially as prices charged by drug manufacturers continue to rise. For the first time, more than 50% of Optum Rx members are external members, that is, non-UHC members.
Second, we believe pharmacy services must be closer to patients. As a result, you will see our continuous efforts in the independent pharmacy service business to connect pharmacy care more closely with medical care. Integrated value-oriented healthcare means integration. When pharmacy care is aligned with medical care, patient outcomes we serve improve, accessibility increases, and overall healthcare costs decrease.
Specifically, on the Optum Rx pharmacy service side, Genoa continues to expand its dedicated behavioral health pharmacy layout to serve patients with severe mental illness and substance use disorders. Specialty pharmacies continue to expand through both sales and structural growth, while improving patient support for increasingly complex treatments. Infusion services are also becoming increasingly important as we help move proper care to a less costly and more convenient scenario. We will continue to expand our portfolio of integrated pharmacy services and make them as close to the healthcare scene as possible, bringing better care, convenience, and accessibility.
Go to Optum Insight. 2026 is both a year of implementation and investment, and there will be meaningful progress in 2027, laying the foundation for accelerated growth in 2028 and beyond. Our investment focuses on further developing and bringing to market dedicated AI solutions for the healthcare industry to improve productivity, performance, and results while improving the patient and clinician experience.
Overall, we look forward to 2027 with confidence. Our major rectification work has almost been completed, laying a solid foundation for the growth of Optum as a whole.
Next, I handed over the meeting to Wayne.
Wayne DeVeydt - Chief Financial Officer
Thanks Patrick and good morning everyone. The third-quarter results reflect continued progress across the enterprise and improvements in the execution of our businesses that have been focusing on operational reforms aimed at bringing better consumer and clinician experiences. For the third quarter of 2026, we reported revenue of $113 billion, and adjusted earnings per share of $4.69, up from $2.92 in the same period last year. The comprehensive medical reimbursement rate for the quarter was 88.4%, compared to 89.9% in the same period last year. The quality of earnings is strong and sustainable as we head into 2027.
At UnitedHealthcare, performance continues to reflect pricing discipline, basic care cost management, and improvements in nursing services. We continue to be in awe of the still-high usage trend, which usually rises in the second half of the year, and is particularly evident in our risky businesses. At Optum Health, we're seeing steady progress through modernization, a return to disciplined, value-oriented healthcare, and operational improvements, and actions taken throughout 2026 are beginning to bear fruit. At Optum Insight, performance benefits from technology and AI-driven improvements, including improvements in payment integrity and broader operational efficiency, while we invest in new areas to expand and modernize our products to drive growth. At Optum Rx, we continue to see the benefits of disciplinary execution and the breadth of our pharmacy service model, which is now built on simpler and more transparent ways to serve these evolving market needs.
Switch to the whole year. Our updated 2026 adjusted earnings per share guidance is “at least $20.50,” reflecting third quarter performance and balanced with anticipated investment for the last few months of this year. From a capital allocation perspective, our priorities remain the same. First, reinvest in the business through targeted endogenous growth and the steady expansion of nursing services, technology modernization, and widespread AI applications.
Second, maintain a strong balance sheet. Third, return value to shareholders. Our balance sheet remains strong. The debt-to-capital ratio at the end of the quarter was 41.7%, and we are still expected to approach 40% by the end of the year. We bought back $5 billion of UNH shares in the third quarter. We've paid $6.2 billion in dividends year to date, and are expected to exceed $8 billion by the end of the year. Our strategy remains focused on capacity building that is consistent with our ability to create value for consumers, benefit sponsors, and customers, and enhances this ability while supporting long-term shareholder growth.
We believe the 2026 “at least $20.50” adjusted earnings per share guidance is a solid growth base. What we want to say is that current analysts' agreed expectations for 2027 may underestimate the opportunities ahead, and we think the lower limit of the long-term 13% to 16% growth range is a more reasonable starting point.
Looking more broadly at 2027, we continue to see a balanced set of downwinds and headwinds. The downwind includes continuous improvements at the enterprise level, share buybacks, improvements in value-oriented healthcare performance, and further benefits from AI and modernization — they improve the consumer and clinician experience, increase productivity, reduce costs, and create sustainable performance improvement opportunities for our business and the people we serve, as well as product opportunities for Optum Insight. On the headwinds side, we will accelerate investment in policy reform and business modernization, particularly in UnitedHealthcare and Optum Insight, while continuing to be in awe of healthcare trends and the wider external environment — where health benefits funding is still under pressure.
Overall, we are steadily and methodically improving the performance of our entire portfolio. We are capable of ending 2026 strongly and will continue to focus on continuing to deliver long-term growth targets of 13% to 16%.
Next, I handed the meeting back to Steve.
Stephen Hemsley - Chief Executive Officer and Non-Independent Non-Executive Chairman
Thanks Wayne. Before I get to the questioning session, let me wrap up with a few thoughts. Over the past year or so, our priorities have been clear: return to our core mission and culture; better serve healthcare needs as a company and a leadership team; rebuild financial and operational discipline; reverse and enhance performance by business and performance metrics; and begin to reimagine and modernize everything we do to harness the impressive potential of modern intelligent technology to streamline processes, improve service levels, and speed up response and service to consumers and clinicians. Finally, reposition all businesses to a responsible and profitable endogenous level of growth.
As you have heard today, we are well advanced in all of these areas, but fully meeting these priorities requires us to step beyond our “four walls.” Across the company, we all spend time listening carefully to our customers, consumers, clinicians, policy makers, and other stakeholders. We do this with humility and service, aware of the positive role we can play when we are at our best, and our responsibility to improve the healthcare system experience. These conversations help to re-establish and reinforce a fundamental understanding that success in healthcare depends on relationships and trust, and we need to continue to build both with all stakeholders.
We will continue to listen, continue to learn, and continue to advance our business in ways that improve the experience, provide greater accessibility and lower costs, and deliver better results. And for all shareholders, all of these responsibilities are consistent with each other and create value. The progress we made in 2026 gave us confidence. Our business is improving, our modernization efforts are progressing, and our investments in AI and integrated value-oriented healthcare are now generating real benefits while positioning ourselves for the future.
We will continue to focus on running our business better, ending 2026 strongly, and laying the foundation for growth in 2027, 2028, and beyond. We look forward to providing you with a more comprehensive update on our outlook for next year before the end of the year.
Now thank you all. Moderator, please be open to questions.
Q & A session
presenter
[Moderator Tip] The first question comes from Justin Lake of Wolfe Research.
Justin Lake - Wolfe Research, LLC
I'd like to focus on government business first, and specifically your review about Medicaid. The situation is improving. Would you like to talk about the level of operation and the drivers for the third quarter? Taking into account your improvements, is it now back to roughly break-even? Also, please tell us what is the current profit margin level of Medicare Advantage?
Stephen Hemsley - Chief Executive Officer and Non-Independent Non-Executive Chairman
Mike, can you answer that question?
Michael Cotton - Medicaid CEO
OK. Thanks Justin, and thank you for the question. As Tim pointed out, our membership numbers and overall disease severity are within expectations, and we now expect our full 2026 performance to be slightly better than previously predicted. Key drivers of this performance are our focus on managing complex care costs, select networks and services, increased member engagement (particularly in our AI-driven coaching activities), modernization efforts, and ongoing identification and elimination of fraud, waste, and abuse. We do believe these initiatives are sustainable. We saw good improvements in the third quarter and are confident this trend will continue for the rest of the year.
We continue to see high trends in behavioral health services, specialty pharmacy services, and home and community services, as does the cost of inpatient care. These high levels are slowing down slightly, and we are continuing to monitor. We expect profit margins to improve as we enter next year and will continue to work with state partners to reduce the persistent gap between funding and healthcare cost trends throughout the year. Again, as far as 2028 is concerned, we are very hopeful that we can return to a reasonable level of profit margins by the end of that year. Thanks for asking.
Bobby Hunter - CEO of Government Programs and Head of Medicare Insurance
Justin, for me, I'm Bobby, about the Medicare profit margin you mentioned. Taking into account our pace of progress in 2026, we now expect to approach the upper edge of the 2% to 4% range. I owe much of it to the excellent restorative actions the team carried out throughout the year, which I think revolved around medical trends, our focus on cost management, and the broader focus on the sustainable product portfolio we brought to market in 2026. It also allows us to invest now and prepare for future success, such as our work on quality, AI, modernization, and physician collaboration. Ultimately, I think this lays a good foundation for our continued success in 2027. Thanks for asking.
presenter
The next question comes from Bernstein's Lance Wilkes.
Lance Wilkes - Bernstein Institutional Services, Research Division
OK. Can you talk about the growth in 2027, particularly Medicare Advantage, and how do you view growth there, given that it is nearing the upper end of the range? Also, how is the sales season for national accounts and PBM going?
Stephen Hemsley - Chief Executive Officer and Non-Independent Non-Executive Chairman
Let's start with Bobby.
Bobby Hunter - CEO of Government Programs and Head of Medicare Insurance
OK, thanks Lance for the question. Yes, the annual insurance period is coming soon. Although we won't be providing official membership guidelines until later this year, we can share a few early observations first. Obviously, part of our work in planning for 2027 is to continue to review and ensure we have a sustainable product portfolio, which means continuing to optimize our footprint and products around the remaining PPO business we began adjusting a year or two ago. But looking at the opportunities, I think the market actually has a lot of good growth potential.
So maybe there's an important piece of data: even with some footprint optimizations, we actually expanded our overall footprint. Tim mentioned this in his opening statement. More than 94% of Medicare eligible Americans can now choose one of our plans, an expansion from last year. We've also taken a more dynamic approach to product planning this year. I think there are real opportunities for smart, sustainable growth in the current market. We are particularly focused on dual special needs programs, chronic special needs programs, and some high-value HMOs.
Moreover, I believe that as we enter the 2027 annual insurance period, the conditions to capture growth in these key areas are better than in recent years, and we have adjusted our market entry strategy accordingly. Finally, I'd like to emphasize that when I think about the company's overall capabilities, the ability we can mobilize, and the importance we place on value-oriented healthcare, I really think we have an excellent opportunity to influence members who choose the D-SNP, C-SNP, and HMO programs, and deliver outstanding results and quality to these people over time.
Stephen Hemsley - Chief Executive Officer and Non-Independent Non-Executive Chairman
Very good. Thanks Bobby.
Timothy Noel - CEO of UnitedHealthcare
OK, Lance, I'm Tim. I'm handing over the microphone to Brandon Cuevas, the new CEO of our commercial insurance business, and ask him to share some information about the commercial insurance sales season and our pricing stance there.
Brandon Cuevas — CEO of Commercial Operations
No, thanks, Lance. Thanks for asking. We've just had two very, very strong years of national account sales. We're happy to see that our renewal rates and group retention are looking very, very strong as we enter 2027. As far as our project reserve and sales season is concerned, it is clear that we have made it far through most of the national accounts sector. We had a very successful sales season this year. I think when it comes to the overall growth entering the commercial insurance business, I think we're still in awe of the trend.
We must pay close attention to rising trends, while also focusing very clearly on affordability. Looking ahead to 2026, we think our growth will reflect some of the upward pressure we are seeing in the market. But our project reserves are growing, and products like Surest and our sales progress in the mid-market have actually continued to be extremely strong. So we have a pretty solid sales season entering 2027, but we are still in the middle market sales process. The momentum of national accounts entering next year is very strong. Thanks for asking.
Stephen Hemsley - CEO and Non-Independent Non-Executive Chairman
Thanks Brandon. What about PBM, Jon?
Jon Mahrt - Chief Growth Officer
OK, thanks Steve. Thanks for the question, Lance. Continuing on Brandon's comments, we've enjoyed a strong sales season for two consecutive years, and we expect this trend to continue this year, driven mainly by transformation and transparency modernization efforts within PBM. These efforts have had a real resonance in the market, and the most fundamental reason is that every Optum Rx customer can benefit from the fully transparent supply chain tools we are building.
As a result, this has led to a retention rate that also remained high at 90% this year. At the same time, as Patrick mentioned in his opening statement, we have also been successful in the new customer market and have maintained pricing discipline. Our membership size has now grown to over 50% of the population we cover, and we expect this trend to continue in 2027. As the year comes to an end, we are in close touch with our customers. We are in the busiest phase of the insurance season. Brandon and I still have work in progress to advance together. We will be in close communication with these customers as we update our 2027 Member Outlook. Thanks for asking.
presenter
The next question comes from Wells Fargo's Stephen Baxter.
Stephen Baxter - Wells Fargo Securities, Research Division
To complete some 2027 information, I think you've just made the assumptions about health plans and PBM quite clear. Can you add a few words about how you view Optum Health and Optum Insight's revenue momentum and how to reposition these two businesses for growth in 2028 and beyond?
Stephen Hemsley - CEO and Non-Independent Non-Executive Chairman
Of course. Let's start with Krista and then Sandeep.
Krista Nelson - CEO (Optum Health)
OK. Thank you so much for the question, Stephen. I'd like to first highlight some of the performance we actually saw in the third quarter. Our clinical programs and healthcare management have been very strong. These projects will continue to be effective as we move into 2027. Our work includes reducing unnecessary hospitalizations, improving access to primary care and preventative care, and improving the accessibility of home health services to help serve patients in our community and at-home settings. As for 2027, we'll be rolling out more details in the coming months. But I think I'm very confident in our ability to achieve profitable growth in 2027. Our focus will be on truly thoughtful growth.
I might be able to point out a few things as opportunities for this business to grow in 2027 and in the real long term. First, we serve 20 million patients today, of which approximately 4 million are fully responsible. So full responsibility relationships still have room to grow, but more importantly, there are plenty of opportunities for professional responsibility sharing, shared balances, and other ways we can serve patients in an integrated model. Second, I would like to point out the high performance service line we have today. Examples include home health, hospice care, surgery centers, D-SNP, C-SNP, and HMO. Similarly, there are plenty of opportunities for these services to further cultivate in the existing market and serve more patients more comprehensively.
Finally, I'd like to point out our opportunities to launch new products on the market. Maybe take an example. This year, we partnered with one of these payers to expand our ability to manage risk throughout the post-acute phase. In other words, it extends from inpatient care to professional care facilities (SNF) and home health. We are seeing a very strong market demand for these products to fully serve post-acute care risks. We are also very happy with the results. We are seeing improvements in access to timely medical services, as well as improvements in the use of in-home health services. I think you'll see this type of project expand in 2027 as well.
So overall, it's still a multi-year journey to ensure we're properly moving towards our target profit margin range of 6% to 8%, but we've seen plenty of growth opportunities within Optum Health.
Stephen Hemsley - CEO and Non-Independent Non-Executive Chairman
And you guys are really interested in doing something new.
Krista Nelson - CEO (Optum Health)
Exactly.
Stephen Hemsley - CEO and Non-Independent Non-Executive Chairman
Sandeep?
Sandeep Dadlani - Executive Vice President and Chief Digital and Technology Officer
OK. Stephen, for Optum Insight, the goal is to use AI to simplify healthcare and serve consumers, healthcare providers, payers, and life sciences companies. 2026 is progressing according to plan, and I hope you will understand Insight as a multi-year journey of investment and execution. So here are a few elements that are changing. We continue to sort out and withdraw unreasonable existing products and contracts. But at the same time, we're injecting AI into existing products, making them more competitive and profitable, and launching new AI-first products and platforms.
Here are a few examples showing momentum: Our Optum AI consulting team is partnering with a Medicaid program to use intelligent AI to help them decide on the most complex claims in seconds rather than days. Another example is a product called Optum Integrity One, which automates claims coding in the revenue cycle area. We launched it at the end of 2025, when we had only 2 customers; today, we have 15 customers who have implemented it and 24 more are implementing it. So you can see the momentum of some of our new AI customers. We also recently announced a partnership to join the Anthropic partner network. In previous quarters, we announced similar listing partnerships with Microsoft and Google on a number of products. We're seeing strong disciplinary execution, new AI-first team members, new product teams, and more. Over the next two quarters, we'll see a series of product launches. So overall, combined with these changing elements, we are very confident about the outlook for 2027. Thank you.
Stephen Hemsley - CEO and Non-Independent Non-Executive Chairman
AI is reshaping that business.
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The next question comes from UBS's A.J. Rice.
Albert Rice - UBS Investment Banking, Research Division
I want to get back to the commercial insurance business. In the venture business section, you have indicated that it may operate at a profit margin level of less than 5%. Part of the reason is the issue of the independent dispute resolution mechanism you mentioned. It sounds like you are saying today that this situation is stabilizing somewhat. I know you've said before that this business has high single-digit profit margins of around 7% to 10%. I would like to hear your views on the pace of profit margin restoration there, and please also talk more about the stabilizing situation you have seen so far.
Stephen Hemsley - CEO and Non-Independent Non-Executive Chairman
Tim, can you talk about it first?
Timothy Noel - CEO of UnitedHealthcare
OK, thanks A.J. As we mentioned in our opening statement, we see that the medical cost trend of commercial insurance is stabilizing, albeit at a high level, and significantly higher than the historical norm we have seen in the commercial insurance business. When pricing 2027, we took the view that these trends will continue and continue until 2027, and price rationally based on that. As we think about long-term target profit margins and some of the usage pressures we face in the commercial insurance business, this will increase the time it takes for us to achieve our long-term profit margin goals for commercial insurance.
So we'll have to wait a few months for more details. At that time, we'll have an opportunity to dive into some details of that business, but for now, everyone should understand it that way.
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The next question comes from Ann Hynes of Mizuho Securities.
Ann Hynes - Mizuho Securities America Inc., Research Division
Maybe we can refine your previous review about Medicare Advantage a little more. Overall, how do you evaluate your competitiveness in terms of welfare provision compared to your peers? Do you think UNH has what it takes to achieve overall membership growth next year?
Stephen Hemsley - CEO and Non-Independent Non-Executive Chairman
Bobby?
Bobby Hunter - CEO of Government Programs and Head of Medicare Insurance
OK, Ann, thanks for asking. Again, we're not going to give specific guidelines; that will take a few months. Having said that, we have taken a very careful approach for 2027, focusing on investing in benefits, investing in products, and staying stable on products we believe will have a meaningful impact — a meaningful impact on growth, a meaningful impact on the consumers we serve, a meaningful impact on partnerships with value-oriented healthcare providers serving many of these people, and once again thinking about these in the context of our dual special needs plans, chronic special needs plans, and HMO plans.
A large part of the reason we are able to take these remedial actions in 2026 is our focus in these areas, our extensive capabilities in these areas, and our ability to drive more cost management in some health care cost areas. So when I look at 2027 and the competitive landscape, we have a great opportunity to capture some of this growth and continue to serve more members in these areas, which is what we are focusing on as we continue to modernize our business. Thanks for asking.
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The next question comes from Bank of America's Kevin Fischbeck.
Kevin Fischbeck - Bank of America Securities, Research Division
I appreciate previous comments that the trend is usually higher in the second half of the year, but the trend data points we are tracking seem to suggest that the trend started very low at the beginning of the year and accelerated as it progressed. I want to ask, is this consistent with what you guys are seeing? If it's consistent, why might it have accelerated a little more than normal? Also, how confident are you that 2027 pricing will be based on the trend's exit level?
Stephen Hemsley - CEO and Non-Independent Non-Executive Chairman
Tim?
Timothy Noel - CEO of UnitedHealthcare
Kevin, I'm Tim. We haven't seen the dynamics you mentioned. As you looked at our various businesses one by one, we mentioned that commercial insurance has generally remained at this level, stabilized in the more recent period, but is still running above the 11% level we said. We're seeing a slowdown in the Medicaid business. And when we think more broadly about the Medicare business, we see that performance is better than expected. So as far as trend acceleration is concerned, no, we haven't seen it. In fact, we have seen a slowdown in government project business and a stabilization in commercial insurance business.
As far as our forward-looking pricing is concerned, we are now able to use better analytical tools, more real-time information on how healthcare costs are being used to include the latest situation, and incorporate all of this into our forward-looking pricing assumptions, but we haven't seen the kind of increase you mentioned as we progressed throughout the year.
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The next question comes from Goldman Sachs's Scott Fidel.
Scott Fidel - Goldman Sachs Group, Research Division
I want to ask about Medicaid. What interests me is that when you think about 2027 to 2030, Medicaid clearly has cyclical margin repair opportunities because profit margins are still negative. But then it will face the implementation of OB3 reforms, which will gradually expand between 2027 and 2030. Maybe take us through how you view the two offsetting each other, and whether you have a reasonable idea about the approximate average level of profit margins during this period.
Stephen Hemsley - CEO and Non-Independent Non-Executive Chairman
mike?
Michael Cotton - Medicaid CEO
Scott, thanks for the question. As we look at the next four years, the Medicaid business will definitely go through a cyclical process. If we look back at history, we've seen this happen, and we expect Medicaid to do the same during this cycle, especially when OB3 is taken into account. We believe there is an opportunity to return to a reasonable level of profit margins in 2028. We will continue to focus on clinical care management, cost management, and use AI tools to do these things. We do believe that over time, we will have the opportunity to examine each market, examine how it fits with our strategies for people with dual special needs, and ensure that these practices work. But overall, we think getting back to those profit margin levels and staying there is an opportunity for us and will be our goal until 2030. Thanks for asking.
Stephen Hemsley - CEO and Non-Independent Non-Executive Chairman
In the long run, Medicaid is a good, resilient market that can continue to grow.
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The next question comes from J.P. Morgan's Lisa Gill.
Lisa Gill - J.P. Morgan Chase, Research Division
I have a question about specialty pharmacies. You guys mentioned it on the cost side, but Patrick also talked about it on the opportunity side. There are two things I'd really like to know. First, you mentioned infusion services. I'm curious about current capabilities in this area and what you guys think about infusions. Second, what do you think of the potential opportunities in biosimilars?
Finally, a review about integrating healthcare and pharmacy. You mentioned that 50% of customers are now external. I'm curious how would you combine these two entities if they aren't under the UnitedHealth umbrella?
Stephen Hemsley - CEO and Non-Independent Non-Executive Chairman
OK. So let's let Patrick start first, then Jon, then we might go back to Patrick to talk about integrating that part, OK?
Patrick Conway - CEO (Optum)
OK, Lisa, thank you for the question. We'll point out a few areas. First, specialty pharmacies, as you know very well, are a growing market as drug pipelines and patient needs evolve. What we said in our opening comments is that we are increasingly bringing it closer to our own nursing service companies and the vast number of clinicians in the market. Jon and his team did an excellent job in this area. Whether on restricted distribution drugs (LDD), we have achieved a high bid rate through the care model developed in collaboration with Krista and Optum Health teams, and we have also collaborated with external clinicians, doctors, and prescribers. So we're seeing this market continue to grow, and it's about service, experience, and patient care.
Infusion services, you also mentioned, as you know, are a lower cost scenario and more convenient for patients. What we've heard from payers and other customers is that they want infusion services to grow because of lower costs and a better patient experience. Similarly, we have a robust clinical care model and growth in this field.
I'll have Jon talk more about the PBM and pharmacy linkage before we move on.
Jon Mahrt - Chief Growth Officer
OK, very good. Thanks Patrick. Lisa, I'll start by talking about the strength of our specialty pharmacy — Patrick has already started. In terms of specialty pharmacies led by Mike Einodshofer and the team, we are winning in terms of experience, Lisa. So if you look at overall sales, sales may have dropped 5% this quarter, while specialty pharmacy sales actually increased 2.6% this quarter. This is driven by several initiatives. We are winning in healthcare provider selection, which is also a strong LDD bid rate, our strongest year in recent years, Lisa. Plus the ongoing construction of our Center of Excellence — our center of excellence in the field of treatment. We already have 15 such centers serving the healthcare provider sector. This allows us to be very close to those providers within our coverage footprint.
Within specialty pharmacies, we are also winning in terms of consumer experience. We recently received the “Specialty Pharmacy of the Year” award from the American Specialty Pharmacy Association, an extremely competitive award. This puts us in an advantageous position to serve consumers as we continue to expand our layout. This service resonated with our PBM customers who wanted specialty pharmacy care to extend seamlessly as part of their drug benefits.
Patrick Conway - CEO (Optum)
Perhaps a couple more brief remarks about biosimilars, because you asked this: we have seen very strong adoption of biosimilars in the customer base, with the lowest net cost. The Optum Specialty Distribution we've set up works well. Finally, I would like to point out that there is excellent collaboration between Krista and Jon's team to ensure that Optum Health's clinicians and pharmacies work together to provide the kind of integrated care experience for the patients we serve.
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The next question comes from Morgan Stanley's Erin Wright.
Erin Wilson Wright - Morgan Stanley, Research Division
As you continue to make progress in reversal of Optum Health, I would like to ask how should we view Optum Health's profit margins, and where will they fall in the range of 6% to 8% in 2027? And in the longer term, how do you think profit margins might exceed even that range? Are there any structural constraints that would limit further profit margin expansion? As this business and business structure changes, and your work on automation and AI, will this support higher profit margins for a longer period of time?
Stephen Hemsley - CEO and Non-Independent Non-Executive Chairman
OK. Before Krista answers, maybe a general explanation: As to the limited things we can say about 2027, we'll have a conversation with you before the end of the year to give you more information about 2027. Our views on 2027 are very positive; but we've provided probably more forward-looking views on this call than ever before. So based on that, I think the outlook is very positive. Krista and Mike, would you like to respond?
Krista Nelson - CEO (Optum Health)
OK. Thanks Steve and Erin for the question. Again, I want to go back to the work we've been doing to reposition this business for long-term success. We're very happy with the performance we've seen in 2026. The third quarter was another great example. That core performance improvement is sustainable and will make a meaningful contribution to our 2027 outlook. Again, I think 2027 will be a year of strong progress towards achieving a strong 6% to 8% in 2028. That's really our focus. As I mentioned in my previous question, I'm optimistic and see plenty of growth opportunities in this business, covering every area I've mentioned. But again, we look forward to more details. I see some of this starting in 2027, and there are opportunities for this business in 2028 and beyond in the three areas I mentioned.
Stephen Hemsley - CEO and Non-Independent Non-Executive Chairman
So very positive, but we really can't give an exact number right now.
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The next question comes from Barclays Andrew Mok.
Andrew Mok - Barclays Bank, Research Division
Optum Health's profit before interest and tax guidance still seems to suggest that the fourth quarter was significantly negative. Can you take us through what is driving this intense seasonality and help quantify fourth-quarter investment that could affect this sector?
Krista Nelson - CEO (Optum Health)
OK, OK. Thank you for your question. I mentioned that the third quarter's performance will continue into the fourth quarter, but the fourth quarter did reflect the seasonal nature of the venture business, which is normal for this business, along with some additional investment we made in long-term performance. Among these additional investments, think technology, AI, but more specifically, they even include improving workflows for our clinicians to ensure we can provide the focused and appropriate expansion accessibility, while making it easier to care for patients to deliver strong quality results and support the kind of integrated experience we call it.
So think of it as an AI-driven nursing summary, which makes it easier for clinicians to prepare for medical visits; we've talked a lot about environmental perception, which is how to move from just listening and recording to providing clinicians with insight into the best next steps; in addition, there is also a lot of work I mentioned earlier in terms of scheduling. We have also made other investments in clinician workflows, also to support the long-term sustainable performance of this business. These are just some of the fourth quarter highlights. I'd say that overall, the third quarter will continue into the fourth quarter, but there will be some seasonal effects of risky business performance. Thank you.
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The next question comes from Matthew Gillmor of KeyBanc.
Matthew Gillmor - KeyBanc Capital Markets, Research Division
I'd like to ask about some of the policy matters Tim Noel mentioned. I think you've talked about collaborating with CMS on quality work. You have also addressed the issue of independent dispute resolution mechanisms. I hope you can give us a sense: in the next few years, how would you like to see these projects evolve to be constructive to the system?
Timothy Noel - CEO of UnitedHealthcare
OK, thanks Matthew for the question. Yes. As far as the IDR process is concerned, we are actually referring to the dispute resolution process. We definitely agree with the spirit of this legislation, but the results and results we have seen are payments that are many, 10, or 11 times what Medicare is payable under certain circumstances. This is too high, and is exacerbating the lack of medical affordability we are currently seeing. So our comments on the IDR process relate specifically to dispute resolution itself, its inefficiency, the costs associated with it, and the results it produces, rather than the spirit of this law, because we fully agree with that.
Next I'll hand over the microphone to Bobby and ask him to talk about modernizing the Medicare plan.
Bobby Hunter - CEO of Government Programs and Head of Medicare Insurance Practice
OK. Thanks Tim. Matthew, you mentioned this, and I would like to say that we are very grateful for the positive and ongoing dialogue with CMS and policy makers. What I want you to hear from us is that we support modernization, we support reforms that advance plans and ensure their sustainability. We provided ideas in this regard, and I think they include quality opportunities, payment opportunities, affordability opportunities, administrative efficiency, technical interoperability, all of which were submitted in response to CMS requests for proposals.
Importantly, Medicare Advantage has a very strong foundation on which to continue to build. So as we move forward in these opportunities for transformation and modernization, it's important to do so in a thoughtful manner and with broad stakeholder participation — this means not only planners like UnitedHealthcare, but also healthcare providers, clinicians, members, and the wider range of stakeholders, all of which are critical to this conversation. And all of this requires putting the stability of the plan first, and I am optimistic about its prospects. Thanks for asking.
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The next question comes from Ryan Langston of TD Cowen.
Ryan Langston - TD Cowen, Research Division
OK. You recently talked about making some unique investments in star rating projects. The details have now been revealed, so please excuse me if I missed it, but can you tell me about the scale and possible types of investment in the star rating project? Also, it would be helpful if you could comment on your broker's strategy before the insurance period is open.
Bobby Hunter - CEO of Government Programs and Head of Medicare Insurance Practice
OK, Ryan, I'm Bobby. I'll answer the star rating one first, and then quickly answer the broker's one. Overall, we are very satisfied with the execution of the manageable matters during the star rating season. Our long-term view of quality is no different from our approach to products and pricing. We knew at the time that as we repositioned benefits for 2026 in response to financial and policy headwinds impacting the entire industry, there might be some star rating pressure, which is why we are investing to drive improvements in key areas such as clinical outcomes and pharmacy outcomes. The results you've seen are that, as a result, we achieved year-over-year improvements in almost every HEDIS and Rx indicator this star rating season.
But we're not satisfied with that. There is more work to be done, and more opportunities. As we move forward, there are more opportunities to invest and improve further, and that's what we're focusing on. So please understand our continued investment in the fourth quarter of 2026 and into 2027 as continuing to accelerate rather than slow down, as quality and star ratings are critical to the overall business.
Finally, about the broker you asked. I'd like to say, similar to my review of product positioning, as we enter 2027, our approach is more dynamic, and our strategic positioning may be more advantageous than in recent years. There are key growth opportunities in the D-SNP, C-SNP, and HMO fields. We have also adjusted our broker strategies and marketing strategies accordingly. We are entering the market with a very clear goal: to achieve good stability in our basic business and achieve good growth in areas where we think there are good opportunities. Thanks for asking.
Stephen Hemsley - CEO and Non-Independent Non-Executive Chairman
Thank you. I think we're here — I appreciate everyone's questions and enthusiasm for participating this morning. We'll finish this meeting now, but the whole team will be there for the rest of the day, and if you have any questions that haven't been answered, or if you have further questions, we're always ready to chat. Thank you all again for your time today. I hope everyone can feel the momentum we are bringing into 2027, as our emphasis on disciplinary enforcement and the vastly improved patient and healthcare provider experience will continue to move forward. I think we'll keep accumulating on a quarter-by-quarter basis. We look forward to providing you with a more complete outlook. We'll meet before the end of the year to have a deep conversation with investors and provide more information about 2027. Thank you and I wish you all a happy day.
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This concludes our meeting for today. Thank you all for participating and I wish you all a happy day.