UnitedHealth Group misses mark on profit, Optum struggles

UnitedHealth Group has struggled over the past few months, with Q2 earnings revealing that while it surpassed expectations on revenue, it once more has missed the mark on profit, due in part to medical trends and rising Medicare costs.

UHG pulled in $116.6 billion in revenue in Q2, up from the $98.85 billion the company logged in the same quarter in 2024. But profit was just $3.4 billion, down from the $4.2 billion in profit the company recorded in 2024.

The struggles extended to subsidiary Optum, with Optum CEO Patrick Conway saying during UHG’s earnings call Tuesday that the company was $6.6 billion below expectations in earnings. Conway attributed this to a number of factors, including an accelerated medical cost trend, lower service volumes and an underestimation of new members’ risk status.

“Clearly Optum’s performance this year has also not met expectations,” said Conway. “We’re approaching this with humility … and a commitment to better execution.”

Optum outlined an improvement plan, which included improving the implementation and consistency of its clinical model. The organization also signaled that it would commit to margin recovery in its value-based care business, align its benefits and footprint with payer partners, and cease arrangements for patients in fully accountable PPO products. 

Conway said Optum will continue to narrow its exposure beyond 2026 and said he expects “meaningful recovery” next year, although there would be a longer path to recovery in the value-based care business.

“Our mixed execution is a clear setback,” he said.

WHAT’S THE IMPACT

UHG revamped its outlook Tuesday morning, expecting now to bring in about $16 in earnings per share, and between $445.5 billion and $448 billion in revenue. That breaks down to a revenue outlook of $344 billion and $345 billion for UnitedHealthcare, and between $266 billion and $267.5 billion for Optum.

UHG’s profit for the first half of the year now stands at about $9.7 billion, up from the $2.8 billion posted through the first half of last year, which was affected by the Change Healthcare cyberattack. Revenues at the year’s halfway mark were also up, sitting at $221.2 billion, an increase from the $198.65 in revenue through the first half of 2024.

The second quarter consolidated medical care ratio of 89.4% increased 430 basis points year-over-year. The increase was primarily due to medical cost trends, which significantly exceeded pricing trends, including both unit costs and the intensity of services delivered, and the ongoing effects of Medicare funding reductions. 

Medical reserve development was $70 million unfavorable in the second quarter 2025, with nearly all related to 2025 dates of service.

UHG CEO Stephen Hemsley said the company has a plan in place to right the financial ship.

“UnitedHealth Group has embarked on a rigorous path back to being a high-performing company fully serving the health needs of individuals and society broadly,” said Hemsley. “As we strengthen operating disciplines, positioning us for growth in 2026 and beyond, the people at UnitedHealth Group will continue to support the millions of patients, physicians and customers who rely on us, guided by a culture of service and longstanding values.”  

THE LARGER TREND

When UHG revealed its financials for Q1 – which was also a disappointing quarter – it said that heightened care activity indications in its Medicare Advantage business cropped up, particularly in physician and outpatient services, leading the company to cut its outlook.

UHG also attributed the mixed performance to unexpected changes in Optum Health members' profiles, which will affect reimbursement this year "due to unexpectedly minimal 2024 beneficiary engagement by plans exiting markets."

Late last week, UHG officially acknowledged an investigation by the U.S. Department of Justice for alleged criminal healthcare fraud, as the feds seek to probe its Medicare Advantage practices.

A lawsuit filed in May against UHG claims the healthcare company misled investors about its financial outlook following the murder of then-CEO Brian Thompson, who in December was killed by a gunman while attending the company's annual investor day in New York.

The suit accuses UHG of allegedly hiding a corporate strategy to deny medical care and downplaying the impact of Thompson's murder on the business. That harmed shareholders, according to the lawsuit, which was filed by a group of shareholders and is now seeking class action status.

Plaintiffs argued that UHG's financial guidance, released prior to Thompson's death, became obsolete once Thompson had died, and yet the insurer reiterated that financial guidance at the start of this year.