Dive Brief:

• UnitedHealth posted a record $447.6 billion in revenue in 2025, though the healthcare giant’s profits continue to drop as a result of higher medical costs and lower reimbursement in Medicare.
• UnitedHealth brought in $12.1 billion in profit last year, down from $14.4 billion the year prior, according to financial results released Tuesday. It’s the company’s lowest annual profit since 2018 as insurance spending and restructuring costs ate into UnitedHealth’s bottom line.
• The company also issued a mixed outlook for 2026, including its first revenue contraction in decades. Earnings expectations were slightly above analyst estimates, though UnitedHealth’s path to higher margins could be made much trickier by the unfavorable MA rate proposal issued by the Trump administration on Monday. UnitedHealth’s stock fell 16% in premarket trading after the release.

Dive Insight:

UnitedHealth operates a major pharmacy benefits manager, a network of thousands of physicians, a data and analytics arm and even a bank. The company offers insurance to employers, in the safety-net Medicaid program and in the Affordable Care Act exchanges.

UnitedHealth has its fingers in a lot of pies. But no single business line has defined the company over the past few years like Medicare Advantage. UnitedHealth has seen its MA margins plummet as Biden-era regulatory changes cut into reimbursement at the same time as seniors utilized more medical care and that care got more expensive.

UnitedHealth’s 2025 results show how drastically this double whammy slammed the profitability of its payer arm UnitedHealthcare and its value-based care unit Optum Health.

Last year, UnitedHealthcare — the largest private insurer in the U.S. and the biggest MA carrier — saw its revenues jump 16% to almost $345 billion. But its operating margin was basically slashed in half, and its earnings fell to $9.4 billion, down 40% year over year.

Meanwhile, Optum Health, which sits within UnitedHealth’s health services division Optum, operated at a loss of $278 million in 2025. That’s compared with a gain of $7.8 billion in the year prior.

Along with rising utilization, UnitedHealth executives in part blame V28, a new MA coding system that was created by the Biden administration and phased in over three years.

V28 has reduced payments to insurers and value-based companies in the privatized Medicare program by some $130 billion, Tim Noel, the CEO of UnitedHealthcare, said on a Tuesday call with investors.

And the MA industry is now reeling from the possibility of future funding cuts. On Monday, the CMS proposed a largely flat payment increase for 2027, appalling health insurers and sending stocks in managed care companies reeling.

Regulators also proposed changes to how risk scoring is calculated that would prevent insurers from pulling extra unsupported diagnoses from patient charts to inflate their reimbursement. If finalized, the proposal is expected to disproportionately affect UnitedHealthcare, given it’s the largest MA payer and it codes more intensely than its peers.

UnitedHealth executives agreed the proposed rates are way too low, and warned that they will cut benefits, trim markets and take other actions to preserve their MA profits if it’s finalized.

The 2027 advance notice is “disappointing,” Noel said. “We’re going to of course work with CMS from now until the rates are finalized, but as it all sits today, as I talked about, it will mean very meaningful benefit reductions.”

UnitedHealthcare already expects to lose between 1.3 million and 1.4 million MA members in 2026 because of margin recovery actions and how competitive open enrollment was for the year, Noel said.

That’s higher than the company’s previous expectation of a roughly 1 million membership shave.

Meanwhile, Optum Health, which cares for MA enrollees through contracts with insurers, has cut affiliated providers from its network and lowered its risk-based membership by 15%, including by dropping unprofitable contracts, to try and recoup profits, according to Optum CEO Patrick Conway.

The division is going “back to basics,” Conway said on the call.

UnitedHealth has been working to rebuild investor confidence after being hit with barrage of internal and external challenges over past few years.

Tuesday’s results, including new 2026 guidance, are not likely to help.

UnitedHealth expects to bring in revenue above $439 billion this year, which would represent a small drop from 2025, as the company continues to right-size. However, UnitedHealth’s earnings outlook came in better than expected — the company is forecasting adjusted earnings per share greater than $17.75 this year.

“We think the 2026 set up is good [with] realistic underpinning assumptions around trend/margins,” Leerink Partners analyst Whit Mayo wrote in a note on the results. “Optum Health will require some more work, but the reality is the Advance Notice will overwhelm the picture in the short-run.”

Still, UnitedHealth remains gung-ho on its turnaround plan. The company spent $2.5 billion in the back half of the year on restructuring and other related costs, including folding its financial services division into Optum Insight.

UnitedHealth also continues to review its practices, and committed to publishing more internal information in 2026.

That includes data about prior authorizations and claims approval rates, along with PBM Optum Rx’s rebate practices, CEO Stephen Hemsley said.

As the conglomerate moves to increase consumer trust, UnitedHealth also recently pledged to send all of the profits it makes in the ACA exchanges this year back to its consumers. UnitedHealth cast the announcement as doing its part in light of skyrocketing premiums for ACA plans, though the offer was colored by the fact that the ACA business has very low profits.

“Over the course of the decade-plus in which we have operated in that market, it has never been a significant contributor of earnings for us,” CFO Wayne DeVeydt said on the call. Though, the ACA markets should drive positive margins around 1% in 2026.