During the second quarter earnings call in 2025, UnitedHealth Group's Chairman and CEO, Stephen Hensley, thanked employees for their service during challenging times and outlined the company's reassessment of business and action plans. He emphasized the company's renewed commitment to its mission of helping people live healthier lives and making the healthcare system work better for everyone. Hensley also mentioned the company's transformation of culture and external relationships, as well as how the company is pursuing reform and improvement in the face of challenging environments, including Medicare funding cuts starting in 2023.

A leading provider of healthcare services is facing unprecedented healthcare cost trends, including increased service utilization, rising unit prices, more aggressive medical service provider coding, and technological infrastructure. In the face of market contraction, demand for new technology investments, and expectations for providing a better experience, the company is committed to improving the healthcare system by establishing better partnerships with all stakeholders, increasing business transparency, and maintaining a high level of integrity. The company acknowledges mistakes made in pricing and operations, and is working to improve key processes through annual reviews by independent experts. To achieve the goals of reform and performance improvement, the company is undergoing extensive management and operational changes, including leadership, business, culture, practices, and board governance. These changes will continue to align performance with the company's mission, strengthen the organizational culture consistent with the mission, and be accountable for performance. The upcoming discussion will cover specific business, financial performance, and factors influencing outlook.

The company is facing a situation where non-medical healthcare revenue is insufficient by 2025, primarily attributed to medical costs exceeding expectations, especially in the Medicare and commercial business sectors. In the Medicare Advantage business, the company underestimated the accelerated growth of medical costs and failed to adjust benefits or plans adequately to address the pressure. In the commercial business, particularly in group health insurance, medical cost trends are close to 11%, higher than expected. In addition, the Medicaid business also faces rising costs and accelerated behavioral health costs. To address these challenges, the company is strengthening audit, clinical policy, and payment integrity tools, promoting stricter management of products, enhancing communication with state partners, and leveraging AI technology to optimize operations in order to restore operational capabilities and execution effectiveness.

The company is actively responding to changes in the 2026 health insurance policy, especially the adjustments to the Part D program caused by the Inflation Reduction Act. The goal is to achieve a marginal return of 2 to 4% through pricing adjustments, product design, and benefit changes, with a focus on the Medicare Advantage pricing strategy, expecting a trend of close to 10%. To support this goal, certain plans with significant impact have been decided to be withdrawn, and adjustments have been made to the pricing of Medicare Supplement Group, MA, and standalone Part D. Additionally, due to expected increases in medical costs and potential market exits, a decrease in membership and a shift in product categories are expected. Furthermore, due to expected expiration of premium subsidies and adverse selection dynamics, the company is cautiously participating in most markets, and may need to exit certain markets if necessary rates cannot be achieved. In terms of Medicaid, despite facing additional marginal compression and losses from non-dual eligible population due to lag between funding levels and member health risks, the company remains committed to serving people through the program in a financially stable condition.

The healthcare system in the United States is facing accelerated cost issues, and Optum is dedicated to improving its business performance to drive better health outcomes and maintain the affordability of healthcare. Faced with underperforming results, Optum is taking a series of measures, including leadership adjustments and optimization of business execution, especially addressing challenges in its value-based care business. They emphasize the effectiveness of the value-based care model in improving patient health and plan to address current challenges by deepening value-based care, optimizing service volume, and risk assessment. Additionally, Optum also plans to enhance its role in the healthcare system by adjusting its products and services and adopting a more transparent strategy, aiming to provide better healthcare services for all Americans.

The dialogue elaborates on the problems encountered in current medical and health services, including non-standardized management, unclear market positioning, and insufficient risk control, and a series of improvement measures taken. The main content includes promoting consistent and centralized regional operating models, evaluating and adjusting the positioning in various markets, transferring risks back to the original underwriters, and improving the efficiency and benefits of basic care by optimizing clinical models, product combinations, and operating modes. In addition, it also emphasizes the use of technology integration, such as AI application, to achieve cost reduction and operational efficiency improvement, and provides specific explanations on the profitability and improvement goals of different business segments. The ultimate goal is to achieve long-term marginal profit growth and efficient, high-quality delivery of medical services.

The company has lowered its outlook for the year 2025 by $1 billion, citing reasons including slow recovery in some businesses, one-time network security expenses, and the suspension of certain investment portfolio actions to prioritize growth and innovation. OptumRx's customer retention rate remains high, but revenue growth is expected to be affected by low margin drugs, while profit growth is constrained by various factors, including the cancellation of investment portfolio actions, adjustments to certain ancillary businesses, the impact of new businesses in their early stages, and GLP-1 drugs. In the second quarter, overall revenue increased by 13%, but adjusted earnings per share were lower than the same period last year, mainly due to pricing and trends in medical costs. Among the business segments, UnitedHealthcare saw revenue growth but operational earnings decreased, Optum Health saw a decrease in revenue, and Optum Insight saw an increase in revenue, although customer recovery was slower than expected.

Optim Rx's revenue in the second quarter increased by 19% to reach 38.5 billion, primarily benefiting from the continued contributions of new customer advertisements and specialty drug products. The adjusted total prescription volume reached 414 million, a slight increase compared to 399 million in the same period last year. For the outlook in 2025, the adjusted earnings per share are expected to be at least $16, with revenue estimated to be close to 448 billion, an 11% increase year-on-year. The full-year medical care ratio is expected to be 89.25%, influenced by various factors. Additionally, the total estimated settlement amount for the year is 1.6 billion, with a tax rate of approximately 18.5%. Cash flow from operations is estimated to be 16 billion, 1.1 times the net profit. The company will continue to evaluate capital priorities to achieve long-term growth potential.

The discussion focused on Optum Health facing rate increases and how to address the higher trend on the insurance side. Mention was made of considering maintaining the same profit margins next year as this year for Optum Health, as well as discussions with external plans, including whether they have taken similar pricing steps to achieve more reasonable marginal returns.

The health insurance company is addressing future financial challenges by adjusting pricing strategies, collaborating with payers to reduce benefits, utilizing AI technology to lower operational costs, and deeply engaging in patient population management. These strategies are expected to offset half of the financial headwinds, with the other half being mitigated by continuing to optimize operational costs and improve efficiency in patient population management, with the goal of maintaining a 1% profit margin by 2026.

During the discussion, the management of United Health Group provided detailed answers to analysts' questions regarding the company's performance in the second half of the year and the profit margin of the future Medicare Advantage plan. They pointed out that considering the measures the company is taking and the characteristic of most premium income being repriced in January each year, it is expected that the profit margin of the Medicare Advantage plan in 2026 will be within a range of 2.5%, by reducing benefits and controlling trend costs, to overcome the challenges brought by government funding cuts and inherent trends.

In the conversation, the long-term earnings per share (EPS) growth target of United Health Group (UHC) was discussed, with the original target being 13% to 16%. It was mentioned that although recent growth does not fully reflect the company's potential, the long-term growth framework remains unchanged. In addition, profit margin targets for different business segments were discussed, as well as how the company adjusts its strategy in response to market changes and policy adjustments (such as changes in IRA), including postponing certain business combination actions, and exploring the impact of these adjustments on long-term earnings.

Last year, the company reevaluated its portfolio of all businesses and took action to adjust and divest some businesses. The new strategy is to focus on maximizing the potential of the existing business portfolio, ceasing previous business restructuring activities, and placing full focus on current business performance. The company has removed any content related to business restructuring from future outlooks and will concentrate on the performance of existing businesses in the future.

In the discussion, a detailed exploration of the company's future planning for certain businesses was carried out, including whether to continue holding or to sell, as well as the complex motivations behind these decisions. At the same time, a thorough discussion of the company's management processes and strategic review process reforms was conducted, emphasizing a return to basic management disciplines, strengthening the in-depth review of business financial and operational metrics, and increasing the overall involvement of the management team to achieve more efficient corporate operations and strategic decision-making. Additionally, mention was made of the comprehensive business review and future planning process that the company is currently implementing, as well as the new expectations for the leadership team and the new standards set during this process.

The dialogue focused on business growth and investment strategies for 2026 and beyond, emphasizing the need for investments in areas such as Optum Insight, AI agenda, and Optum Financial to drive product updates, cost optimization, and business growth. It also discussed the time required to realize the returns on these investments, with significant accelerated growth expected in 2027-2028. In addition, it mentioned the market demand for technology-driven solutions and plans to provide the necessary financial flexibility through unified solutions. Finally, it emphasized the positive impact of executing these strategies on long-term growth.

Uber Health adjusted its long-term goal, setting a target profit margin of 5% for its core care business. Previously, the business had the same target profit margin before 2023. The adjustment is mainly due to the income impact caused by the B28 policy. Uber Health emphasizes that they are taking a more cautious approach, giving more time for practices to reach the expected performance levels, and continuing to invest in achieving comprehensive accountability practices. At the same time, they point out that as the business matures, long-term stable marginal returns will become possible.

During the discussion, the senior management of the company detailed the adjustments to the management review process, the conservative assumptions underlying the reserves, and the independent third-party audits. They emphasized respect and adaptation to the current environment, as well as utilizing data analysis to optimize pricing and communication with partners. Additionally, they mentioned strengthening internal audit reviews within the company, enhancing actuarial resource base, utilizing AI technology to strengthen analytical capabilities, and expanding conservative judgments in decision-making to comprehensively review and improve the entire enterprise's risk management and forecasting processes.

The conversation discussed the expected marginal profits in the medical insurance business from 2025 to 2026, especially for different populations, including group business, retail, and Special Needs Plans (SNP), as well as the overview of marginal profits and recovery paths. It was pointed out in the discussion that group business faces significant medical cost pressure, while the retail and SNP sections have relatively stable performances, with significant growth in D-SNP and C-SNP areas. In order to improve marginal profits, pricing strategies will be implemented, and adjustments will be made to products and benefits, especially by withdrawing a large number of PPO plans to drive marginal profit growth for 2026. In addition, collaboration with value-based care providers such as Optum will be strengthened to enhance care management for specific populations.

In the conversation, it was mentioned that for non-core Medicaid businesses in 2025, it is expected to achieve a balance between income and expenses. However, profit expectations for Medicaid in 2025 are expected to decrease due to ongoing high medical trends and increased levels of care usage. In 2026, negative margin income is expected to be between -1% and -1.7%. Additionally, it was mentioned that 80% of premium growth is expected to increase due to improvements in pricing cycles, but no specific compound growth rate was given.

United Health Group detailed its cost trend assumptions in the discussion regarding its health insurance business. It is expected that medical costs will increase at a trend of approximately 10%. At the same time, the group plans to adjust pricing strategies in the commercial market to respond to the pressure of rising costs, with the goal of achieving a profit margin for commercial business close to but slightly lower than its target range. In addition, the group also discussed the expected profit margins in government project business, such as Medicaid, and how to address these challenges through premium adjustments and benefit design.

The conversation discussed the expected increase in medical insurance premiums, especially in the areas of Medicaid and Medicare. It is expected that Medicaid premiums will increase by about 6% in 2026, while Medicare adjustments will track CMS adjustments. At the same time, settlement issues related to value-based care contracts and Optum Health were discussed, pointing out that these settlement issues are not limited to Optum Health and also involve other business areas, including issues with the collectability of receivables and disputes with clients and providers. The total amount of settlement issues was detailed and showed the distribution among different departments.

Discussions focused on optimizing plan design, investing in care management and operational cost efficiency, as well as leveraging artificial intelligence (AI) to drive efficiency and decision-making to achieve the recovery of medical insurance marginal returns. Emphasis was placed on close collaboration with the Optum team, utilizing AI not only to improve efficiency but also to help predict and rapidly respond to challenges, in support of meeting or exceeding mid-term goals.

In the latest conference call, a healthcare company discussed in detail the results of its business line review, its continued commitment to Value-Based Care (VBC), and how to support this strategy by increasing care capabilities and assets. The impending completion of a medical acquisition deal was specifically mentioned, emphasizing the importance of providing care services in the home environment, and the value placed on possessing a variety of clinical assets and home care capabilities. Furthermore, the company highlighted the comprehensiveness in providing services for physical, mental, social, and financial needs, and discussed a plan to achieve long-term stability and growth through an integrated care service system.