Assess the progress of the turnaround efforts over the past year and reaffirm confidence in the 13% to 16% earnings growth trajectory.

The company remains in "improvement and urgency mode" with a restless approach to its mission. Management reaffirms confidence in the 13% to 16% long-term growth rate, believing it is achievable through productivity gains and technology use, despite recent challenges. “I don't ever believe I ever didn't believe in the 13% to 16% long-term growth rate. We will have moments along the way when we don't perform to our potential.”

Clarify current MA cost trends versus 2025 levels and initial 2026 bids, and how this impacts 2027 bid assumptions.

MA medical cost trends are coming in lower than initial planning assumptions for 2026, but still remain high compared to historical levels. This is due to internal initiatives and external factors like a lighter respiratory season. 2027 bids reflect current experience without expecting a meaningful deviation from elevated underlying core trends. “for Medicare trend is coming in lower than our planning assumptions. However, it's really important to note this does not represent an inflection point in trend, we're continuing at those high levels, but it's coming in lower than our benefit planning assumptions.”

Inquire if the current strong earnings performance ($19.50-$20 EPS guidance) is a durable baseline for future 13-16% growth, or if any one-time factors should be adjusted.

The $19.50 to $20 EPS guidance is considered a durable stepping-off point for future growth. While there are ongoing investments and some prior period development, the underlying run rate is strong, and future commercial recovery will be a tailwind. “I do think, as Steve highlighted, the earnings are quite durable. And we do think the $19.50 to $20 is the right stepping off point, albeit it reflects prior period development.”

UNH

UnitedHealth Group (UNH) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Health Care· Jul 16, 2026

Source: earnings call transcript

Executive summary

UnitedHealth Group Q2 FY26 — Strong Performance Driven by Medicare and Optum, Commercial Pressures Persist

UnitedHealth Group delivered a strong second quarter, exceeding expectations in Medicare and Optum segments, while commercial medical cost trends remained elevated. The company is actively leveraging AI and strategic investments to modernize healthcare experiences, improve operational efficiencies, and drive long-term growth, despite ongoing pressures in certain benefit areas. Management remains committed to its 13-16% long-term growth algorithm.

Highlights

Adjusted EPS grew 56.4% to $6.38 compared to $4.08 in the prior year.
Operating earnings grew 55% year-over-year to $8 billion.
Operating cash flows were approximately $11 billion, 1.9x net income.
Medicare Advantage enrollment decline now expected to be approximately $1.1 million, better than previously anticipated.
Patient experience in OptumHealth care delivery sites is up approximately 5% year-over-year, and patient access expanded by nearly 200,000 patient-facing hours.

Concerns

Commercial medical cost trends are stubbornly high, modestly above 11%, driven by the No Surprises Act IDR process and aggressive billing.
Medicaid margins are expected to remain pressured for 2026, within the negative 1% to negative 1.7% range, due to lagging reimbursement rates.
Commercial margin recovery trajectory is extended past 2027 due to persistent elevated trend.

Guidance & targets

Category	Target	Timeline	Confidence
Full year 2026 adjusted EPS	$19.50 to $20.00 high materiality	FY26 · 2026	High
Full year 2026 UnitedHealthcare operating earnings	at least $12 billion high materiality	FY26 · 2026	High
Full year 2026 Optum Health operating earnings	at least $2.2 billion high materiality	FY26 · 2026	High
Full year 2026 medical care ratio	88.1% plus or minus 25 basis points high materiality	FY26 · 2026	High
Full year 2026 share repurchases	at least $5 billion high materiality	FY26 · 2026	High
Debt-to-capital ratio	approximately 40% medium materiality	Q4 · 2026	High
Medicare Advantage enrollment decline	approximately $1.1 million high materiality	full year · 2026	High
Medicare margins	above 3% high materiality	full year · 2026	High
Prior authorization volume reduction	30% medium materiality	Q4 · 2026	High
Prior authorization requirements for pediatric care reduction	nearly 2/3 medium materiality	Q4 · 2026	High
OptumHealth AI-based ambient listening capabilities	exceed 90% low materiality	Q4 · 2026	High
Manufacturer rebates pass-through	100% medium materiality	Q4 · 2027	High
Prior authorization processing in real time	80% medium materiality	Q4 · 2027	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
UnitedHealthcare Improved performance in Medicare businesses through benefit planning, design, care management, and network curation. Commercial benefits remain pressured by higher-than-expected cost trends. Medicare Advantage enrollment decline: approximately $1.1 millionMedicare margins: above 3%	—	—	—	—
Optum Health Building momentum from recentering to integrated value-based care. Significant changes in operations are yielding tangible results in clinical care and operational experience. Margins expected to continue to steadily improve. 10% reduction in hospitalization since late last year in Western and Southern regionsMore than 20% improvement in timely care delivery in home health pilotsPatient experience up approximately 5% YoYPatient access expanded by nearly 200,000 patient-facing hoursAI-based ambient listening capabilities available to 70% of employed providers, on track to exceed 90% by year-end	—	—	—	at least $2.2 billion
Optum Rx Performing to plan, leading industry shift towards transparency and fee-based services. New pharmacy care approach based on monthly per-member fees with full transparency. Client retention rates in the high 90sExpect to end 2026 with more than 95% of clients on 100% manufacturer rebate pass-through	—	—	—	—
Optum Insight On multiyear path of reinvestment and innovation, bringing modern, intelligent technologies to the health system. AI-enabled approaches are gaining traction and driving impact for customers. Value Connect AI-driven insights platform: 17% reduction in pharmacy costs for early clientsDigital prior auth product processed 69,000 prior auths for external entities, saved 69,000 administrative hours	—	—	—	—

UNH operating KPIs by quarter

UNH operating KPIs stated on its earnings calls, by fiscal quarter
KPI	Dec 2024 Q4 FY24	Mar 2025 Q1 FY25	Mar 2026 Q1 FY26	This call Jun 2026 Q2 FY26	Sep 2026 Q3 FY26	Change vs prior quarter
Employees	400K Right now, there are 400,000 nurses, doctors, case workers, customer service specialists, pharmacists, technologists and so many others in this organization who share that commitment and are determined to advance that work. Source: earnings call transcript	400K The growth at UnitedHealthcare and Optum reflects the efforts of our 400,000 colleagues who come to work every day thinking differently about what is possible, advancing new products and ideas while constantly refining existing programs, working to make things better for the people we are privileged to serve. Source: earnings call transcript	—	—	—	0%
Medical care ratio	—	—	83.9% Our reported medical care ratio of 83.9% compares to 84.8% in the first quarter of 2025 as a result of pricing discipline, strong medical cost management and favorable reserve development. Source: earnings call transcript	86.7% Our reported medical care ratio of 86.7% includes $860 million of net favorable prior period medical development, the majority of which is in year development. Source: earnings call transcript	88.4% Consolidated medical care ratio of 88.4% for the quarter compared to 89.9% last year. Source: earnings call transcript	+1.7 pt
Patients OptumHealth	—	—	—	20M OptumHealth is intently focused on improving its clinical care and operational experience to better serve the 20 million people we care for through primary and specialist care, ambulatory surgery and home health. Source: earnings call transcript	20M First is we serve 20 million patients today, about 4 million of those are in fully accountable relationships. Source: earnings call transcript	0%

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Product announcements

Product	Type	Timeline	Details
New pharmacy care approach	launch	May 2026

Deals & partnerships

Alegeus acquisition

Successfully closed the previously announced combination with Alegeus on July 2.

Risks & headwinds

Elevated medical costs in Medicare through the first half of the year

well above historical levels

Mitigation:Benefit design, care management models, network curation.

Pressured Medicaid margins for 2026

negative 1% to negative 1.7% (expected 2026 margins), annualized 2026 rate impact will be in the zone of around 6% to 7% and still lagging elevated medical trend

Mitigation:Partnering with states on appropriate rates, initiatives targeting elevated behavioral health cost trends, identifying and reducing fraud, waste and abuse.

Stubbornly high commercial medical costs through the first half of the year, 2026

modestly above 11% level we previously saw, 50 basis points or so of incremental trend in 2026 from IDR, totaling at least 100 basis points of total cost from IDR

Mitigation:Improved administrative cost efficiency, AI-enhanced fraud waste and abuse efforts, diligent focus on medical cost affordability. Commercial margin recovery extended past 2027.

Ineffective No Surprises Act IDR process 2026, years past

upwards of 40% of all claims that enter the IDR process are ineligible, roughly 60% of all arbitration cases are brought by 1 of just 5 entities, average payout from arbiters... is now 11x what Medicare would pay with some of those decisions ranging up to 30x

Mitigation:Needs to be reformed.

Q&A highlights

Inquire about Medicaid margin expectations for the year and the magnitude of commercial cost trend pressure, including the timeline for commercial margin recovery.

Medicaid margins are expected to be within the previously communicated negative 1% to negative 1.7% range for 2026. Commercial trend is modestly above 11%, with 50 bps attributed to the IDR process. Commercial margin recovery is delayed past 2027 but is not a setback, aiming for 7% or greater.

“I see '26 as a delay to that margin recovery trajectory, not a setback. So the sticky nature of the persistent and elevated trend is extending the time frame for full margin recovery past 2027, as we've previously discussed and you highlighted.”

asked by Justin Lake · answered by Daniel Kueter

2 min read 7 chapters

Detailed narrative

Enterprise-Wide Modernization and AI Integration

UnitedHealth Group is actively embracing AI to reimagine its operations, improve service interactions, reduce administrative burden, and support better decision-making across all businesses. This tech-forward view aims to simplify processes, increase consistency, and accelerate the redesign of healthcare experiences for consumers and providers.

The company views AI as a core initiative and the operating infrastructure of the future, with significant opportunities for productivity gains and commercialization of internal tools.

UnitedHealthcare Performance and Strategic Adjustments

UnitedHealthcare's overall Q2 performance exceeded expectations, driven by better results in Medicare Advantage due to benefit design, care management models, and network curation. While Medicare medical cost trends are below initial estimates, commercial costs remain stubbornly high, modestly above 11%, primarily due to the No Surprises Act IDR process and aggressive provider billing.

The company is making reinvestments to build a stronger foundation for 2027 and beyond, focusing on modernizing essential healthcare experiences.

Optum's Integrated Value-Based Care Momentum

All three Optum segments (OptumHealth, OptumRx, Optum Insight) are performing in line or ahead of plan. OptumHealth is seeing positive momentum from its integrated value-based care delivery model, with significant changes in operations leading to improved clinical care and operational experience.

Initiatives like enhanced support during care transitions have reduced hospitalizations by approximately 10%, and home health initiatives have driven over 20% improvement in timely care delivery.

OptumRx's Transparency and Client Retention

OptumRx continues to perform to plan, leading an industry shift towards transparency and fee-based services. The company announced a new pharmacy care approach based on monthly per-member fees with full PBM and GPO fee transparency, receiving positive client feedback. High client retention rates in the high 90s underscore the success of these initiatives, including the commitment to pass through 100% of manufacturer rebates by the end of 2027.

Optum Insight's AI-Enabled Solutions

Optum Insight is on a multiyear path of reinvestment and innovation, bringing modern, intelligent technologies to the health system. AI-enabled approaches, such as AI-enabled coding and real-time payer/provider interfaces, are gaining traction, driving impact for customers. The Value Connect platform, an AI-driven insights tool, has shown early client results including a 17% reduction in pharmacy costs.

Commercial Market Challenges and IDR Process

The No Surprises Act's Independent Dispute Resolution (IDR) process is identified as a significant driver of elevated commercial medical cost trends. Management notes that the IDR process is ineffective, with 40% of claims being ineligible and 60% of arbitration cases brought by just five entities.

The average payout from arbiters is 11x what Medicare would pay, with some decisions up to 30x, indicating a need for reform.

Long-Term Growth and Mission Alignment

The company reaffirms its commitment to a 13% to 16% long-term growth rate, driven by productivity gains and capital utilization, particularly leveraging technology. The focus extends beyond financial metrics to a broader mission of positively impacting all stakeholders in the health system, with a "restless and urgent" approach to continuous improvement and modernization.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.