Can Optum Offset UnitedHealth's Health Benefits Growth Woes?

Yes, UnitedHealth Group Incorporated UNH is increasingly relying on its Optum business to drive growth and offset challenges in the health benefits segment, UnitedHealthcare. Optum has become the company’s primary growth engine, delivering stronger margins and faster revenue growth compared with the insurance unit, which remains pressured by rising medical costs, particularly in Medicare Advantage.

The business operates across three key areas: Optum Health (care delivery and physician groups), Optum Insight (data analytics and tech solutions) and Optum Rx (pharmacy benefit management). These are less vulnerable to the cost fluctuations that weigh on insurance operations.

From 2022 to 2024, Optum’s revenues grew 17.5%, 24% and 11.6%, respectively, consistently outpacing UnitedHealthcare’s 12%, 12.7% and 6% growth over the same period, respectively. UNH continues to invest heavily in expanding Optum Health’s clinics and physician groups to build a more integrated, recurring care model and reduce reliance on the insurance segment, which faces regulatory and cost pressures.

Optum Insight’s advanced data capabilities give UNH a competitive edge in risk prediction and care management across both business arms. However, the Change Healthcare cyberattack in early 2024 exposed vulnerabilities and led to financial and reputational setbacks. Still, analysts expect Optum to remain UNH’s key profit driver, as it accounted for more than half of total operating income in 2024.

Overall, UnitedHealth’s strategic focus on Optum is a clear move to counterbalance the struggles in the health benefits business and maintain long-term earnings growth, especially as it withdraws from unprofitable international markets like South America.

How Are Humana & Elevance Health Faring Compared With UNH?

Humana Inc. HUM has seen relatively weaker profits, declining about 1% over the past five years against UnitedHealth's 13% growth. Its adjusted net margins, 4.4% in the first quarter of 2025, trail behind UNH’s 6%. Humana’s benefits expenses rose 13.9% year over year in 2024 and 5.6% in the first quarter of 2025. 

Elevance Health, Inc.'s ELV profits grew 11.3% over the past five years, putting it well above Humana but below UNH. Its adjusted net margin was 5.6% in the first quarter of 2025. Elevance Health’s benefits expenses grew 2.6% in 2024 and 15.6% in the first quarter of 2025.

UnitedHealth’s Price Performance, Valuation and Estimates

Shares of UNH have lost 38.1% in the year-to-date period compared with the industry’s decline of 27.6%.

From a valuation standpoint, UnitedHealth trades at a forward price-to-earnings ratio of 13.18, up from the industry average of 11.95. UNH carries a Value Score of B.

The Zacks Consensus Estimate for UnitedHealth’s 2025 earnings is pegged at $22.28 per share, implying a 19.5% drop from the year-ago period.

The stock currently carries a Zacks Rank #5 (Strong Sell).

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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