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Jan 27 (Reuters) – UnitedHealth (UNH) on Tuesday forecast 2026 adjusted profit slightly above analysts’ estimates, in a sign that medical cost-control measures under CEO Stephen \u200bHemsley were beginning to reap results.<\/p>\n
Hemsley, who returned as CEO in May to restore \u200cinvestor and consumer trust in the healthcare behemoth, has been working to steer the company out of a \u200cdifficult period that included the murder of a top executive, a surge in medical costs, a federal probe, and Americans’ anger at insurance industry practices.<\/p>\n
The company has been aiming for a return to growth in 2026, but expects a challenging recovery in its Medicaid business for \u2060lower-income Americans due to a \u200cmismatch between payment rates and costs for medical services. It has also pulled back on Medicare Advantage offerings for older adults.<\/p>\n
The US on \u200dMonday proposed an average rate increase of 0.09% in payments to private insurers next year for the Medicare Advantage plans they manage, far below Wall Street’s expectations.<\/p>\n
This sent shares of top insurers \u200bHumana (HUM), CVS Health (CVS), and UnitedHealth all tumbling well over 10% before the bell.<\/p>\n
CMS typically \u200cfinalizes Medicare Advantage rates in early April. If the current proposal holds, the rate increase would result in more than $700 million in payments to Medicare Advantage plans in 2027.<\/p>\n
UnitedHealth sees annual profit per share of greater than $17.75, compared with analysts’ average estimate of $17.74, according to data compiled by LSEG.<\/p>\n
The company has struggled with higher costs across government-backed \u2060plans for over two years, driven by increased utilization \u200bof behavioral health services, specialty drugs and home-health \u200bservices.<\/p>\n
For the year, adjusted medical care ratio – the percentage of premiums spent on medical care – was 88.9% compared with 85.5% in 2024. Analysts on \u200daverage had expected 89.1% \u2060for 2025.<\/p>\n\n
The increase was driven by a reduction in Medicare funding, changes from the Inflation Reduction Act combined with accelerating medical cost trends, the company said.<\/p>\n
On \u2060an adjusted basis, UnitedHealth earned a fourth-quarter profit of $2.11 per share, compared with analysts’ average estimate of $2.10, \u200caccording to data compiled by LSEG.<\/p>\n
(Reporting by Sriparna Roy and Sneha S \u200cK in Bengaluru; Editing by Shinjini Ganguli)<\/p>\n<\/p><\/div>\n