UnitedHealth Group plans "remediation actions" as insurance costs balloon

Axios

12 hours ago

UnitedHealth Group 's stock continued its year-long descent Tuesday after the insurer warned that escalating medical costs will continue to drag down its earnings.
Why it matters: The nation's largest insurer has taken a steep hit in 2025, struggling with several financial challenges while continuing to face public scrutiny for coverage denials and patient expenses.
Driving the news: The company reported Tuesday that its medical care ratio soared by 4.3 percentage points to 89.4% in the second quarter as costs "significantly exceeded pricing trends," stemming in part from "the intensity of services delivered, and the ongoing effects of Medicare funding reductions."
In other words, patients are using their insurance plans at a much higher rate than expected.
The company expects its full-year medical cost ratio to be about 89.25%.
Zoom in: UnitedHealth reestablished its earnings outlook after suspending it in May, announcing the sudden exit of CEO Andrew Witty and appointing former CEO Stephen Hemsley to return to the post.
The new outlook projects 2025 revenue of $445.5 billion to $448 billion, net earnings per share of at least $14.65 and adjusted earnings per share of at least $16.
The company said it won't return to earnings growth until 2026.
The outlook showed profit "would be hit harder than Wall Street was expecting," Bloomberg reported, noting the company's "ability to quickly cope with unanticipated, rising expenses is limited" due to the fact that pricing changes only once a year.
The impact: UNH shares were down 4.4% Tuesday at 11am ET, and are now down more than 46% on the year.
Threat level: Tim Noel, CEO of the company's UnitedHealthcare insurance division, said on a conference call that customers can expect "strongly responsive pricing for 2026" as "we are intensifying our remediation actions."
"We have stepped up our audit, clinical policy and payment integrity tools to protect customers and patients from unnecessary costs," he said, adding that the changes will be "grounded in safety and quality while also identifying waste and abuse in outlier coding and billing practices."
The company, Noel said, will also be "shifting to narrower networks and focusing on more disciplined, managed products, particularly in Medicare Advantage, and we have scaled our AI efforts across health plan operations, which improves the patient and provider service experiences while driving cost savings."