UnitedHealth Group outlines reform-driven strategy, projects $16 EPS for 2025 amid $6.5B increase in medical costs

Earnings Call Insights: UnitedHealth Group (UNH) Q2 2025

Management View

• Stephen J. Hemsley, CEO, opened by stating, “More than anything, it is a tone of change and reform borne out of recommitment to our mission to help people live healthier lives and help make the health system work better for everyone.” He emphasized a “real cultural shift in our relationship with regulators and all external stakeholders,” and acknowledged “pricing and operational mistakes as well as others. They are getting the needed attention.” Hemsley highlighted “extensive management and operational changes aligned to this agenda of reform and performance,” and indicated further changes across leadership, business units, and governance would continue.
• Timothy John Noel, CEO of UnitedHealthcare Business, detailed, “Our current view for 2025 reflects $6.5 billion more in medical costs than we anticipated in our initial outlook.” He attributed over half of this to the Medicare portfolio, with the rest split between commercial and Medicaid businesses. Noel noted, “We now expect full year 2025 trend to be approximately 7.5%,” up from the previously assumed 5%. He also shared that UnitedHealthcare is “intensifying our remediation actions” and has “stepped up our audit, clinical policy and payment integrity tools.”
• Patrick Hugh Conway, CEO of Optum Rx, remarked, “Optum’s performance this year has also not met expectations, yours or ours.” Conway cited a $6.6 billion shortfall in OptumHealth earnings versus expectations, with $3.6 billion concentrated in value-based care. He noted, “We are taking these and many other steps swiftly to enable Optum to recapture its historic momentum.”
• John F. Rex, President & CFO, stated, “UnitedHealth Group reported revenues of nearly $112 billion, a 13% increase over the prior year… Adjusted earnings per share of $4.08 was below the same period last year.” Rex explained the quarter included “about $1.2 billion in discrete items,” primarily from unfavorable impacts to ACA exchange offerings and several one-time settlements.

Outlook

• The company’s adjusted earnings outlook for 2025 is “at least $16 per share.” Rex added, “Revenues will approach $448 billion, growth of 11% over ’24.” Full year medical care ratio is expected to be 89.25%, plus or minus 25 basis points, compared to the prior 86.5% midpoint. Hemsley remarked, “Looking to 2026, at this distance, I would expect solid but moderate earnings growth.” Noel described a Medicare Advantage pricing strategy for 2026 that “assumes a trend approaching 10%.”
• UnitedHealthcare plans “significant adjustments to benefits” and will exit plans serving over 600,000 members, mainly in PPO offerings. OptumHealth expects to “cease arrangements for about 200,000 patients largely in fully accountable PPO products.”

Financial Results

• UnitedHealth Group reported revenues of nearly $112 billion for Q2 2025. Adjusted earnings per share came in at $4.08. Second quarter revenues for UnitedHealthcare were $86.1 billion, while OptumHealth revenues were $25.2 billion, a decline of $1.8 billion from last year. OptumRx reported $38.5 billion in revenue, up $6 billion year-over-year. OptumInsight revenues were $4.8 billion, an increase of $285 million.
• OptumHealth now expects to add 300,000 new value-based care patients this year compared to the initial 650,000 outlook. The company’s updated share count is now 912 million to 914 million.

Q&A

• Albert J. William Rice, UBS: Asked about OptumHealth margin projections and payer pricing. Patrick Hugh Conway responded, “as they adjust pricing, that flows into our capitation rates. That is a tailwind versus the headwind we saw this year… we believe we can maintain those margins at the 1% level.”
• Justin Lake, Wolfe Research: Queried about run rate earnings and Medicare Advantage margins. John F. Rex confirmed the second half assessment and explained, “80% of our premium revenues reprice on January 1.” Bobby Hunter, CEO of Government Programs & Head of Medicare Insurance, added, “for the balance of the year… more in the low end of the new normal range… 2% to 2.5% range,” with actions for 2026 expected to expand margins to 2.5%-3%.
• Josh Raskin, Nephron Research: Asked about long-term EPS growth rates and margin targets. Hemsley indicated, “I expect we will pace back steadily to low double-digit ranges and continue to advance from there.” Timothy John Noel reaffirmed, “really no change bottom line to the targeted margin range across UHC.”
• Kevin Mark Fischbeck, Bank of America: Sought clarification on portfolio actions. Hemsley responded, “we stopped that entire activity… and we are focused on the performance of the businesses that we have, and we have removed any of that from our outlook.”
• Lance Arthur Wilkes, Bernstein: Asked about management and strategic review. Hemsley described “much greater intensity around depth of review of the businesses… much more intensive monthly management review.”
• Lisa Christine Gill, JPMorgan: Inquired about 2026 investments. Hemsley named OptumInsight and AI as areas needing investment, while emphasizing cost opportunities. Dhivya Suryadevara, CEO of Optum Financial Services, said, “there is a lot to be optimistic about in both of these businesses… we have the right strategy, we have the right investments and we have the right team to go execute.”

Sentiment Analysis

• Analyst tone was probing and cautious, with repeated focus on margin recovery, pricing discipline, and the credibility of new strategic and operational changes.
• Management maintained a tone of humility and urgency, repeatedly acknowledging “mistakes” and “shortfalls,” while expressing confidence in the remediation plan. Hemsley said, “We are regaining the intensity, the precision and the executional disciplines required to perform consistently and reliably.”
• Compared to the previous quarter, both parties reflect increased urgency, with analysts more focused on the specifics of recovery and management more transparent about operational changes and future risks.

Quarter-over-Quarter Comparison

• Guidance has been revised downward, with Q2 2025 EPS and revenue outlook both lowered compared to Q1. The previous quarter’s EPS guidance was $26-$26.50, now reduced to at least $16 per share. The 2025 medical care ratio outlook increased from 87.5% to 89.25%.
• Management’s tone shifted from frustration and disappointment in Q1 to one of reform, humility, and transparency in Q2. Strategic focus has broadened from addressing utilization and patient mix to deeper operational and cultural reform, new leadership, and technology-driven change.
• Analysts in Q2 pressed more on execution, pace of recovery, and the sustainability of margin targets and recovery strategies, reflecting heightened concern over the company’s ability to stabilize.

Risks and Concerns

• Management cited “fundamental reorientation” required in several businesses, the impact of a “generational pullback in Medicare funding,” “unprecedented medical cost trends,” and “more aggressive care provider coding and billing technologies.”
• The company faces further Medicaid and exchange market contraction, lagging state Medicaid rate updates, and execution risk in value-based care turnaround.
• Analysts raised concerns about the sustainability of cost reductions, the reliability of margin recovery, and the effectiveness of new management and operational changes.

Final Takeaway

UnitedHealth Group’s leadership emphasized a sweeping agenda of reform and operational overhaul after identifying nearly $6.5 billion in additional medical costs and a significant earnings outlook reset for 2025. Management is executing extensive structural, leadership, and process changes, focusing on pricing discipline, cost control, and robust engagement with regulators and stakeholders. The company is pursuing margin recovery through aggressive repricing, portfolio rationalization, benefit cuts, and investments in technology and AI, while acknowledging that 2026 will remain a transition year with stronger earnings growth anticipated from 2027 onward.

Read the full Earnings Call Transcript