UNITEDHEALTH GROUP INCORPORATED (Delaware) 2026 Q3 Earnings Call

Good morning, and thank you for joining us today. Our third quarter performance reflects actions taken throughout 2026, driving meaningful progress and reinforcing our confidence to sustainably grow in 2027 and beyond within our 13%-16% long-term target growth range. Our revised full year 2026 guidance reflects continuing improvements in leadership and execution across Optum and UnitedHealthcare as we better align our businesses to serve the demands of the ever-changing U.S. healthcare environment. We are accelerating the modernization of our enterprise by advancing simplified and more responsive policies, processes, and tools, focusing on more effective integrated value-based care offerings, and responsibly building modern agentic infrastructure as we seek to ensure people have access to higher quality care at lower costs, and at the same time, clinicians experience a simpler, faster, and more supportive system.

Across the businesses, AI-enabled capabilities are beginning to help clinicians spend more time with patients, improve service speed and experience, streamline administration, and reduce friction for both consumers and clinicians. A few examples. We have expanded AI-enabled chart summarization to more than 40% of our employed clinicians, reducing chart review time by 33%. AI-enabled information gathering and research have shortened appeal cycle times by 26%, improving both member and clinician experience, and we expect this to accelerate in 2027. For this year's Medicare Advantage annual enrollment period, we are introducing AI-powered plan recommendation that use a member's care history and local plan options to help simplify their selection. By the end of this year, we are on track to implement all previously announced prior authorization reforms, reducing decision timelines for patients, relieving administrative burden for clinicians, and delivering better experiences for people.

Collectively, these initiatives will reduce total prior authorizations by 30%, including a reduction of two-thirds in prior authorizations for people under the age 18. These efforts are only the beginning. More will follow. They are central to how we're changing our enterprise to be more in line with our mission, creating greater value and positive social impact. In that vein, an important effort is the reimagined United Health Foundation. With $1 billion committed to date, the foundation's investments, along with the dedicated operational expertise of UnitedHealthcare and Optum, can help facilitate scaled solutions to some of the U.S. health system's greatest challenges, including rural health, maternal and infant health, behavioral health, and workforce education. As just one example, in Tennessee, the foundation is helping expand and operate health hubs across the state, providing access to underserved communities in preventative care and chronic condition support.

We will continue to highlight the foundation as part of our commentary on our earnings calls going forward. The broader healthcare environment remains dynamic. Policy-driven regulatory developments, changing consumer expectations, and the rapid evolution of clinical care and advances in technology continue to reshape the industry. These factors are pressuring basic affordability and access as never before. Success requires continuous adaptation, and the pace is accelerating. We recognize this and remain restless in our pursuit of change and improvement. We are challenging our assumptions, revising policies and practices, and repositioning leadership and capabilities to better meet the needs of those we serve and to move faster as an enterprise to adapt to the changing healthcare landscape. That includes opportunities to better align with clinical partners, employers, government benefit sponsors to help improve the experience of all stakeholders in healthcare. We've made progress in our 2026 performance.

We have much to do to approach the full potential of our mission and the positive impact we can make as an enterprise. UnitedHealth Group has a long history of evolution to meet the needs of a changing U.S. health system. We're committed to accelerating these efforts as a stronger, more capable, more mission-centered enterprise. With that, let me turn the call over to Tim Noel.

Thanks, Steve. UnitedHealthcare is seeing positive momentum across our Medicare and Medicaid businesses. While our commercial business continues to adjust to a challenging but steadily stabilizing environment. Costs remain stubbornly high across the entire healthcare landscape, and particularly in areas such as specialty pharmacy and acute healthcare service intensity. We continue to address the challenge of increasingly expensive care with appropriate medical management, operational discipline, and a commitment to identify and remove excess and unnecessary costs from our own enterprise as we advance simpler and more modern services. We are working to deliver stable benefits and value for our members and customers. We believe this positions us for continued organic growth and long-term value creation entering 2027. Let me start with our Medicare business, where the annual enrollment period begins later this week.

Medicare Advantage remains the choice of well more than half of eligible American seniors as it offers better and more modern benefits, and importantly, better outcomes than fee-for-service Medicare. Beneficiaries choosing Medicare Advantage save on average more than $4,000 annually through lower premiums and cost sharing than those on original Medicare. With adequate funding, we believe Medicare Advantage will continue to be the choice of American seniors, particularly those who are disadvantaged and have chronic care challenges as they seek better value and modern care. Heading into 2026, we made deliberate decisions regarding Medicare Advantage benefit design and market positioning to preserve the long-term sustainability and performance of our Medicare Advantage offerings. We continued this disciplined approach for 2027. We believe we are competitively positioned, focused on providing value for seniors in the markets we serve while being mindful of trend dynamics.

In 2027, UnitedHealthcare will continue to prioritize high-value HMO, chronic special needs, and dual special needs offerings. Our commitment to serving America's seniors is clear. More than 94% of Medicare-eligible individuals nationwide will have access to a UnitedHealthcare Medicare plan, and approximately 90% of Medicare-eligible consumers will have access to one of our Medicare Advantage plans with a $0 premium option. We are maintaining important benefits such as dental, vision, hearing, and additional health and wellness offerings that make a real difference in the lives of seniors. UnitedHealthcare chronic special needs plans will be available to nearly 50 million Medicare-eligible individuals in 2027, providing specialized support for people living with conditions such as diabetes, cardiovascular disease, and chronic heart failure. These plans offer benefits and access to care tailored to the unique needs of individuals managing chronic conditions, helping them connect with care, medications, and support they need.

Much of this work is in coordination with our partners at Optum Health, where evidence shows chronically complex seniors served by integrated value-based care experience better preventative care while improving health outcomes at lower costs. Medicare Advantage patients in value-based care arrangements are 40% likely than traditional Medicare patients to be hospitalized for acute and chronic conditions, and 40% less likely to be readmitted to a hospital within 30 days of discharge. Moving to Stars. Our initial Star Ratings for payment year 2028 reflect our investment in quality, member experience, and operating execution. As we move through 2027 and into 2028, we expect to approach 75% of total members in four-plus Star plans compared to the industry average of 70%. Our team remains intensely focused on building a best-in-class consumer and clinical experience.

Along with better benefit design and stability going forward, we believe those efforts will continue translating into stronger quality performance over time. We will continue to work in support of the CMS quality program efforts to ensure the Medicare Advantage program continues to provide quality experience and stability to the 36 million seniors who depend on it. Turning to medical costs. The actions we've taken to improve and modernize care management, strengthen clinical engagement, and enhance operating discipline are having a meaningful effect. Care intensity remains elevated relative to historical norms, even as we continue to see signs that trends are bending in a more stable direction than what we have recently experienced. We remain respectful of trends, and are not assuming any deceleration to historical patterns or to ongoing clinician pricing pressure.

Demand for care remains strong, particularly among senior and complex populations, and we fully support appropriate access to care for our members. Turning to the commercial business. Performance continues to stabilize as we navigate a challenging market. As we previously noted, trends for commercial benefits are exceeding our initial expectations of 11%, driven by an acceleration of costs related to the No Surprises Act, greater cost intensity from clinicians, and high-cost specialty drugs. Of particular concern is the ongoing abuse of the No Surprises Act dispute process by a relatively small number of clinician groups and third-party organizations. Arbitration awards can approach nearly 6% of total medical spend in some regions, translating to billions of dollars in excess costs for consumers, employers, and the health system. The law was intended to protect patients from unexpected bills, and we strongly support that objective.

We will continue working with policymakers and regulators to ensure the law functions as intended and that healthcare dollars are directed towards appropriate patient care rather than significantly inflated market arbitration awards and volumes, along with unnecessary administrative expense. Medicaid remains stable through the back half of the year, while our team continues to drive greater operational improvements through network curation and more effective behavioral health program initiatives. These actions help to partially offset the primary variable, which continues to be the timing and adequacy of state funding across several markets. As we move through the balance of 2026, we continue to work collaboratively with our state partners to ensure rates appropriately reflect the acuity and healthcare needs of the families being served, including the impacts of regulatory actions. While progress has been made in many states, the timing of updates remains uneven.