UnitedHealthcare Under Pressure: Can UNH's Core Business Rebound?

UnitedHealth Group Incorporated’s UNH health benefits arm, UnitedHealthcare, remains the company’s primary revenue engine, yet profitability pressures continue to weigh on investor sentiment. Although the segment’s revenues climbed 15.7% in 2025 to $344.9 billion, adjusted operating earnings fell sharply by 41.1% to $9.6 billion, reflecting reduced Medicare funding and persistently elevated medical cost trends.

Margins compressed significantly. Adjusted operating margin declined to 2.8% from 5.4% a year earlier. The medical care ratio rose to 89.1% from 85.5%, signaling higher spending on patient care. For 2026, management projects the ratio in the 88.3–89.3% range, supported by repricing actions aimed at offsetting cost pressures. Operating earnings are expected to rebound to more than $10.8 billion.

UnitedHealthcare served 49.8 million individuals in 2025, up just 0.8% year over year. However, Commercial Risk Based enrollment declined 7.7%. Looking ahead, total medical membership is projected within 46.945 – 47.495 million in 2026, reflecting declines across commercial risk, Medicare Advantage and Medicaid plans.

Revenue guidance also signals caution. The 2026 total revenue outlook of more than $439 billion compares unfavorably with $447.6 billion in 2025, marking what would be the first annual revenue contraction in decades.

Further uncertainty stems from a proposed 0.09% increase in 2027 Medicare Advantage payment rates, well below expectations. Given that Medicare Advantage represents nearly half of UnitedHealthcare’s revenues, reimbursement trends remain a critical variable. As such, the company is expected to continue its repricing and cost-curbing efforts and streamline operations from less profitable businesses.

Peers Struggle as Medical Cost Pressures Intensify

UnitedHealth’s peers like Centene Corporation CNC and Elevance Health, Inc. ELV are also feeling the pressure from escalating medical costs.

Centene’s 2025 health benefits ratio rose to 91.9%, deteriorating 360 basis points year over year, driven by a sharp 25.5% jump in medical expenses, partially offset by Medicaid rate hikes. Elevance is also facing cost strain, with its benefit expense ratio increasing 150 basis points to 90% in 2025. Meanwhile, the Health Benefits unit’s adjusted operating margin slid to 2.5%, a 170-basis-point decline. These results signal widespread margin pressure and volatility across the managed care landscape.

UnitedHealth’s Price Performance, Valuation and Estimates

Shares of UNH have lost 19.7% over the past month compared with the industry’s decline of 14.9%.

From a valuation standpoint, UnitedHealth trades at a forward price-to-earnings ratio of 15.67, still up from the industry average of 14.09. UNH carries a Value Score of A.

The Zacks Consensus Estimate for UnitedHealth’s 2025 earnings is pegged at $17.69 per share, implying an 8.2% improvement from the year-ago period.

The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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