Due to higher than expected medical costs, UnitedHealthcare will exit certain Medicare Advantage plans, according to information released during Tuesday’s Q2 earnings call.
Without giving details of which markets would be affected, UnitedHealthcare CEO Tim Noel said, “Additionally, and unfortunately, given these pressures, we have made the difficult decision to exit plans that currently serve over 600,000 members, primarily in less managed products such as PPO offerings.”
The company is taking similar approaches for its Medicare supplement, Group Medicare Advantage and stand-alone Part D pricing for next year, Noel said.
The increase in care activity across individual and group Medicare Advantage plans seen earlier this year has now affected complex populations and its Medicare Supplement business, he said.
“Our current view for 2025 reflects $6.5 billion more in medical costs than we anticipated in our initial outlook,” Noel said. “We will be watching the market closely as the 2026 Medicare offerings become public so we can better assess our market positioning and respond quickly.”
WHY THIS MATTERS
When the company prepared its 2025 Medicare Advantage offerings back in the first half of 2024, it significantly underestimated the accelerating medical trend and did not modify its benefits or plan offerings to offset the financial pressure, according to Noel.
This factor was compounded by a number of MA plan exits and also the extent to which it now sees providers placing further service intensity into the health system, he said.
Most of the pressure, about 70%, is coming from physician and outpatient care, while inpatient utilization has also accelerated, he said.
“We continue to see utilization increases in ER and observation stays and consistently see more services being offered and bundled as part of each ER visit and clinical encounter,” Noel said. “In short, most encounters are intensifying in services and costing more.”
UnitedHealthcare initially assumed a Medicare Advantage medical cost trend of just over 5% when configuring its 2025 bids. The full-year 2025 trend is now approximately 7.5%.
THE LARGER TREND
On Tuesday, UnitedHealth Group reported Q2 earnings. It surpassed expectations on revenue but once more missed the mark on profit.
Profit was just $3.4 billion, down from the $4.2 billion the company recorded in 2024.
The struggles extended to subsidiary Optum, with Optum CEO Patrick Conway saying during UHG’s earnings call 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.
Email the writer: SMorse@himss.org