We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
UNH Battles MCR, Optum Bandages: But the Real Wild Card is Washington
Read MoreHide Full Article
Key Takeaways
UNH's MCR jumped to 89.9% in Q3 2025, pressuring profitability amid rising medical costs.
Optum revenues rose 8.2% to $69.2B, with Optum Rx driving 57.4% of the segment's sales.
Potential DOJ scrutiny of Optum Rx and expiring ACA subsidies adds policy uncertainty for UNH.
UnitedHealth Group Incorporated (UNH - Free Report) is feeling the strain as its medical care ratio (MCR) continues climbing, squeezing profitability and unsettling investors. In the third quarter of 2025, MCR surged to 89.9% from 85.2% a year earlier, reflecting stubborn medical inflation and unpredictable utilization trends that leave less premium retained after claims. Yet the company’s Optum division remains a crucial stabilizer. Optum’s revenues rose 8.2% year over year to $69.2 billion and accounted for more than 61% of total company sales, underscoring its importance as UNH’s growth engine.
Optum Rx, the pharmacy benefit management (PBM) arm, drove the segment with 57.4% of Optum’s revenues. That dominance is precisely why headlines around a potential DOJ probe into Optum Rx rattled the market. Any regulatory pressure on this PBM giant could have outsized ripple effects across UnitedHealth’s broader business. Investors are now watching closely for clarity from Washington, both on the investigation and on broader subsidies.
The backdrop is shifting further as enhanced Affordable Care Act subsidies are slated to expire at year-end. Without action, millions could face higher premiums. The White House is reportedly evaluating ways to extend these subsidies temporarily, while industry observers anticipate the administration may roll out a more transparent, consumer-friendly alternative.
Such policy moves could reshuffle enrollment patterns across insurance products. A shift toward higher-margin plans would accelerate UNH’s recovery, while the opposite could create near-term noise. Still, given its scale, data depth, and product innovation capabilities, UnitedHealth appears well-positioned to adapt. Its resilience remains a key investor comfort.
Peers Struggle as Medical Cost Pressures Intensify
UnitedHealth’s peers are also feeling the pressure from escalating medical costs, which have already forced companies like Centene Corporation (CNC - Free Report) and Elevance Health, Inc. (ELV - Free Report) to cut their 2025 outlooks.
Centene’s third-quarter health benefits ratio rose to 92.7%, deteriorating 350 basis points year over year, driven by a sharp 27% jump in medical expenses. Elevance is facing comparable cost strain, with its benefit expense ratio increasing 180 basis points to 91.3%. Meanwhile, the Health Benefits unit’s operating margin slid to 1.4%, a steep 280-basis-point decline. These results underscore widespread margin pressure and persistent volatility across the managed care landscape.
UnitedHealth’s Price Performance, Valuation and Estimates
Shares of UNH have lost 34.8% in the year-to-date period compared with the industry’s decline of 29%.
Image Source: Zacks Investment Research
From a valuation standpoint, UnitedHealth trades at a forward price-to-earnings ratio of 18.87, still up from the industry average of 15.54. UNH carries a Value Score of B.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for UnitedHealth’s 2025 earnings is pegged at $16.29 per share, implying a 41.1% drop from the year-ago period.
Image: Bigstock
UNH Battles MCR, Optum Bandages: But the Real Wild Card is Washington
Key Takeaways
UnitedHealth Group Incorporated (UNH - Free Report) is feeling the strain as its medical care ratio (MCR) continues climbing, squeezing profitability and unsettling investors. In the third quarter of 2025, MCR surged to 89.9% from 85.2% a year earlier, reflecting stubborn medical inflation and unpredictable utilization trends that leave less premium retained after claims. Yet the company’s Optum division remains a crucial stabilizer. Optum’s revenues rose 8.2% year over year to $69.2 billion and accounted for more than 61% of total company sales, underscoring its importance as UNH’s growth engine.
Optum Rx, the pharmacy benefit management (PBM) arm, drove the segment with 57.4% of Optum’s revenues. That dominance is precisely why headlines around a potential DOJ probe into Optum Rx rattled the market. Any regulatory pressure on this PBM giant could have outsized ripple effects across UnitedHealth’s broader business. Investors are now watching closely for clarity from Washington, both on the investigation and on broader subsidies.
The backdrop is shifting further as enhanced Affordable Care Act subsidies are slated to expire at year-end. Without action, millions could face higher premiums. The White House is reportedly evaluating ways to extend these subsidies temporarily, while industry observers anticipate the administration may roll out a more transparent, consumer-friendly alternative.
Such policy moves could reshuffle enrollment patterns across insurance products. A shift toward higher-margin plans would accelerate UNH’s recovery, while the opposite could create near-term noise. Still, given its scale, data depth, and product innovation capabilities, UnitedHealth appears well-positioned to adapt. Its resilience remains a key investor comfort.
Peers Struggle as Medical Cost Pressures Intensify
UnitedHealth’s peers are also feeling the pressure from escalating medical costs, which have already forced companies like Centene Corporation (CNC - Free Report) and Elevance Health, Inc. (ELV - Free Report) to cut their 2025 outlooks.
Centene’s third-quarter health benefits ratio rose to 92.7%, deteriorating 350 basis points year over year, driven by a sharp 27% jump in medical expenses. Elevance is facing comparable cost strain, with its benefit expense ratio increasing 180 basis points to 91.3%. Meanwhile, the Health Benefits unit’s operating margin slid to 1.4%, a steep 280-basis-point decline. These results underscore widespread margin pressure and persistent volatility across the managed care landscape.
UnitedHealth’s Price Performance, Valuation and Estimates
Shares of UNH have lost 34.8% in the year-to-date period compared with the industry’s decline of 29%.
From a valuation standpoint, UnitedHealth trades at a forward price-to-earnings ratio of 18.87, still up from the industry average of 15.54. UNH carries a Value Score of B.
The Zacks Consensus Estimate for UnitedHealth’s 2025 earnings is pegged at $16.29 per share, implying a 41.1% drop from the year-ago period.
The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.