UnitedHealth's headquarters in Minnetonka, Minnesota. Credit: UnitedHealth
Rising health care costs will probably lead to significant increases in premiums for fully insured group health coverage in 2026 and 2027, UnitedHealth executives said today.
"We expect increased membership decline, as well as shifts into both level-funded and self-funded product categories, because of higher medical cost trends," Tim Noel, the chief executive officer of the company's UnitedHealthcare insurance unit, told securities analysts during a conference call.
Noel told the analysts that rising health care costs have been somewhat easier for UnitedHealth to manage at the commercial plans than at Medicare plans and Medicaid plans, because group health renewals occur over the course of a year, and the company can adjust prices to reflect cost changes more dynamically.
But Noel noted that the commercial plans are facing the same kind of strong, steady surge in health care costs that UnitedHealth and other insurers have reported seeing at all kinds of U.S. health plans since the spring.
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UnitedHealth started the year expecting the underlying increase in medical costs at commercial plans to be about 10%, but the actual medical cost trend has been about 11%, Noel said.
For all of UnitedHealth, for all of 2025, the ratio of medical costs to revenue could be about 89.25%, according to John Rex, the company's chief financial officer. At the end of 2024, the company was predicting the full-year medical cost ratio would be 86.5%.
UnitedHealth organized the call to discuss its financial results for the second quarter with the analysts.
The second quarter ended June 30.
UnitedHealth streamed the call live and has posted a recording on its website.
Cost drivers: Many factors are contributing to the increase in the commercial plan medical cost trend, Noel said.
"We are seeing higher-than-expected medical cost increases, particularly in outpatient care and, although to a lesser extent, inpatient care," Noel said. "Orthopedic spending and pharmacy infusions are notable factors here."
The earnings: UnitedHealth as a whole is reporting $3.6 billion in net income for the second quarter on $112 billion in revenue, compared with $4.4 billion in net income on $99 billion in revenue for the second quarter of 2024.
The UnitedHealthcare insurance arm is reporting $2.1 billion in operating earnings on $86 billion in revenue, compared with $4 billion in operating earnings on $74 billion in revenue for the year-earlier quarter.
The company ended the quarter providing or administering health coverage for 50 million people, up from 49 million people a year earlier.
UnitedHealth does not break out group and individual insurance results.
The number of people with fully insured commercial coverage fell to 8.4 million, from 8.7 million.
The number of plans that UnitedHealth administers but does not insure increased to 21.5 million, from 20.8 million.
The future: UnitedHealth's worries about health care spending could be a sign that conflict between health plans and health care providers will intensify in the coming year.
UnitedHealth insurers promised federal regulators in June that they would try to reduce the burden of prior authorization programs on health care providers.
But UnitedHealth executives said today that they will have to look harder to find and root out unnecessary, wasteful or overly expensive care.
"We have stepped up our audit, clinical policy and payment integrity tools to protect customers and patients from unnecessary costs," Noel said. "We are shifting to narrower networks and focusing on more disciplined managed products, particularly in Medicare Advantage. And we have scaled our AI efforts across health plan operations, which improves the patient and provider service experiences while driving cost savings."
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