UnitedHealth Group Incorporated (UNH.US) Q3 Earnings Call: Medical Cost Trends Show No Acceleration, Medicaid Margins Expected to Recover by 2028

UnitedHealth Group Incorporated (UNH.US) reported its third-quarter financial results and held an earnings conference call. UnitedHealth Group Incorporated's third-quarter results continued to recover, and management reiterated confidence in long-term growth. Chairman and CEO Steve Hemsley said in his opening remarks that the third-quarter performance reflected that the actions the company took throughout 2026 are working, and he reiterated the long-term growth target range of 13% to 16%; the company raised its full-year 2026 adjusted earnings per share guidance to "at least $20.50." He highlighted progress in deploying AI and modern intelligent infrastructure: AI medical record summaries now cover more than 40% of the company's own physicians, medical record review time has been reduced by 33%, and AI-driven information gathering and research has shortened the appeals processing cycle by 26%; as planned, all prior authorization reforms will be implemented by year-end, reducing total volume by 30%, including a two-thirds reduction for people under 18. The UnitedHealth Group Incorporated Foundation has so far committed $1 billion, focusing on rural healthcare, maternal and infant health, behavioral health, and workforce education. Chief Financial Officer Wayne DeVeydt reported third-quarter revenue of $113 billion, adjusted earnings per share of $4.69 (compared with $2.92 a year earlier), and a consolidated medical loss ratio of 88.4% (compared with 89.9% a year earlier); the debt-to-capital ratio was 41.7% and will approach 40% by year-end; the company has repurchased $5 billion of shares during the year and paid $6.2 billion in dividends, with total dividends expected to exceed $8 billion by year-end. He believes that current Wall Street consensus expectations for 2027 may underestimate the opportunity, and that the lower end of the long-term growth range, 13%, is a more reasonable starting point. By segment, the company said Medicare margins will be near the upper end of the 2% to 4% range, Medicaid core margins will be slightly better than -1%, with 2026 viewed as the trough year, commercial medical trends remain above 11%, and Optum Health maintained its goal of reaching a 6% to 8% margin range by 2028. The Q&A session focused on medical cost trends and the pace of margin recovery across regional businesses. On Medicaid, the company said membership and disease severity were in line with expectations, and full-year performance will be slightly better than the previously expected range, driven by complex care cost management, network and service selection, AI-enabled coaching, and anti-fraud efforts, but behavioral health, specialty pharmacy, home and community services, and inpatient costs remain elevated, with the goal of returning to reasonable margin levels by 2028; Medicare Advantage margins are now expected to be near the upper end of the 2% to 4% range. On 2027 growth, the company did not provide formal membership guidance for now, but said its footprint has expanded year over year, more than 94% of Medicare-eligible individuals can choose its plans, and it is placing key bets on Dual Special Needs Plans (D-SNP), Chronic Special Needs Plans (C-SNP), and high-value HMOs; commercial national account retention is strong, pharmacy benefit manager (PBM) retention remains in the high 90% range, and the proportion of external members has exceeded 50%. Optum Health said it will make strong progress toward its 6% to 8% margin target by 2028, with growth points including expansion of full-risk relationships, service lines such as home health and hospice, and full-episode post-acute risk products; Optum Insight said 2026 is a build year, with customers of its AI product Optum Integrity One increasing from 2 to 15 implemented, with another 24 in implementation, and it joined the Anthropic partner network. In addition, the company said the timing for achieving its long-term commercial margin target will be extended; management explicitly denied that medical trends are accelerating, saying government business trends are slowing and commercial is stabilizing, and that forward pricing already incorporates more real-time utilization data. The market is most focused on four lines. The first is whether medical cost trends have peaked: the company acknowledged that costs remain "stubbornly high," especially specialty pharmacy and acute-care service intensity, with commercial trends above 11%, but explicitly denied that trends are accelerating, saying government business is slowing and commercial is stabilizing. The second is Medicare Advantage pricing and 2027 growth: the annual enrollment period opens this week, and the company chose to prioritize high-value HMOs and special needs plans, responding to trends with a posture of "stable products, no aggressive expansion." The third is policy and regulatory pressure: the independent dispute resolution mechanism of the No Surprises Act has been abused by some physician groups and third-party entities, with arbitration payouts in some regions approaching nearly 6% of total medical spending; the company said it supports the original intent of the law but opposes arbitration outcomes and process costs, while also expressing support for CMS modernization reforms of quality programs and Medicare. The fourth is the margin recovery path and capital returns: Medicaid targets a return to reasonable levels by 2028, Optum Health targets the 6% to 8% range by 2028, while the timing for achieving the long-term commercial margin target will be extended; on capital, the company maintained $5 billion-level buybacks and continued dividend increases. On Star Ratings, the company said that in the initial ratings for the 2028 payment year, nearly every HEDIS and Rx metric improved year over year, with the target share of members in 4-star and above plans approaching 75% (industry average about 70%). Prepared Remarks Operator Good morning, and welcome to the UnitedHealth Group Incorporated third-quarter 2026 earnings conference call. [Operator Instructions] This call is being recorded. Here are some important opening remarks. This call contains forward-looking statements under U.S. federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or current expectations. A description of some of these risks and uncertainties can be found in our filings with the U.S. Securities and Exchange Commission, including the cautionary statements in our current and periodic filings. This call will also reference non-GAAP data. Reconciliations of non-GAAP data to GAAP data can be found on the company's investor relations page at www.unitedhealthgroup.com under "Financials & Earnings Reports." The information presented on this call, including in the earnings news release we issued this morning and in the Form 8-K dated October 13, 2026, is available on the company's website on the investor relations page. Now I will turn the call over to Steve Hemsley, Chairman and CEO of UnitedHealth Group Incorporated. Stephen Hemsley - Chief Executive Officer and Non-Independent Non-Executive Chairman Good morning, and thank you for joining us today. Our third-quarter performance reflects the actions taken throughout 2026, delivering tangible progress and strengthening our confidence that we can achieve sustainable growth in 2027 and beyond within our long-term target growth range of 13% to 16%. Our revised full-year 2026 guidance reflects continued improvement in leadership and execution across Optum and UnitedHealthcare, and we are better aligning our businesses to serve the needs of a changing American healthcare environment. We are accelerating enterprise modernization: advancing simpler, more responsive policies, processes, and tools, focusing on more effective and more integrated value-based care solutions, and responsibly building modern agentic infrastructure so that people can access higher-quality care at lower cost, while clinicians experience a simpler, faster, and more supportive system. Across our businesses, AI-enabled capabilities have begun helping clinicians spend more time with patients, improve service speed and experience, simplify administrative processes, and reduce friction for both consumers and clinicians. A few examples. We have expanded AI medical record summaries to more than 40% of our own physicians, reducing medical record review time by 33%. AI-driven information gathering and research has shortened the appeals processing cycle by 26%, improving the member and clinician experience, and we expect this effect to accelerate in 2027. And in this year's Medicare Advantage annual enrollment period, we introduced AI-driven plan recommendations that use members' care history and local plan options to simplify their choices. By the end of this year, we will implement all previously announced prior authorization reforms as planned, shortening decision timeframes for patients, reducing administrative burden for clinicians, and delivering a better experience for people. Together, these actions will reduce total prior authorization volume by 30%, including a two-thirds reduction in prior authorizations for people under 18. These efforts are just the beginning, and there will be more to come. They are central to how we are reshaping the enterprise to be more aligned with our mission and to create greater value and positive social impact. In that regard, an important piece of work is the reimagined UnitedHealth Group Incorporated Foundation. The Foundation has so far committed $1 billion, and its investments, together with dedicated operational expertise from UnitedHealthcare and Optum, can help drive scaled solutions to some of the biggest challenges facing the U.S. healthcare system, including rural healthcare, maternal and infant health, behavioral health, and workforce education. To give just one example, in Tennessee, the Foundation is helping expand and operate health centers across the state, providing access to preventive care and chronic disease support for underserved communities. We will continue to provide updates on the Foundation's work in our earnings call commentary going forward. The broader healthcare environment remains highly dynamic. Policy-driven regulatory developments, changing consumer expectations, and the rapid evolution of clinical care and technology continue to reshape the industry. These factors are squeezing basic affordability and accessibility with unprecedented force. Success requires continuous adaptation, and the pace is still accelerating. We recognize this and remain dissatisfied as we pursue change and improvement. We are challenging our own assumptions, revising policies and practices, and reconfiguring leadership and capabilities to better meet the needs of those we serve and to adapt faster as an enterprise to the changing healthcare landscape. This includes better aligning with clinical partners, employers, and government benefit sponsors to help improve the experience of all stakeholders in the healthcare system. We have made progress in our 2026 performance. But to get closer to the full potential of our mission and the positive impact we can have as an enterprise, we still have much to do. UnitedHealth Group Incorporated has a long history of evolution, always adapting to the needs of a changing American healthcare system. We are committed to accelerating these efforts and building a stronger, more capable, and more mission-centered enterprise. Next, I will turn the call over to Tim Noel. Timothy Noel - Chief Executive Officer, UnitedHealthcare Thank you, Steve. UnitedHealthcare is seeing positive momentum in Medicare and Medicaid, while our commercial business continues to adjust to a challenging but steadily stabilizing environment. Costs across healthcare remain stubbornly high, especially in areas such as specialty pharmacy and acute-care service intensity. We continue to address the challenge of increasingly expensive care through appropriate medical management, operational discipline, and a commitment to identifying and removing excess and unnecessary costs from our own enterprise, while advancing simpler, more modern service. We are working to provide stable benefits and value for members and customers. We believe this will position us for continued organic growth and long-term value creation as we enter 2027. Starting with Medicare, the annual enrollment period begins later this week. Medicare Advantage remains the choice of well over half of eligible older Americans because it offers better, more modern benefits and, importantly, better outcomes than fee-for-service Medicare. Beneficiaries who choose Medicare Advantage save more than $4,000 on average per year compared with traditional Medicare through lower premiums and cost sharing. With adequate funding support, we believe Medicare Advantage will remain the choice for older Americans, especially those who are vulnerable, facing chronic care challenges, and seeking better value and modern care. As we entered 2026, we made prudent decisions on Medicare Advantage benefit design and market positioning to preserve the long-term sustainability and performance of our Medicare Advantage products. We continued that disciplined approach in 2027. We believe we have a competitive position, focused on creating value for seniors in the markets we serve while remaining mindful of trends. In 2027, UnitedHealthcare will continue to prioritize high-value HMOs, Chronic Special Needs Plans, and Dual Special Needs Plans. Our commitment to serving older Americans is clear. More than 94% of Medicare-eligible people nationwide will be able to choose a UnitedHealthcare Medicare plan, and about 90% of Medicare-eligible consumers can choose one of our Medicare Advantage plans that offers a $0 premium option. We have retained important benefits such as dental, vision, hearing, and other health and wellness benefits that make a real difference in seniors' lives. In 2027, UnitedHealthcare Chronic Special Needs Plans will be available to nearly 50 million Medicare-eligible people, providing specialized support for patients with conditions such as diabetes, cardiovascular disease, and chronic heart failure. These plans offer benefits and access tailored to the unique needs of people managing chronic conditions, helping them connect to the care, medications, and support they need. A significant portion of this work is done in collaboration with our partners at Optum Health. Evidence shows that older patients with complex chronic conditions who receive integrated value-based care get better preventive care while achieving improved health outcomes at lower cost. Medicare Advantage patients in value-based care arrangements are 40% less likely to be hospitalized for acute and chronic conditions than traditional Medicare patients, and are also 40% less likely to be readmitted within 30 days after discharge. Now to Star Ratings. Our initial Star Ratings for the 2028 payment year reflect our investments in quality, member experience, and operational execution. As we move from 2027 to 2028, we expect the share of members in 4-star and above plans to approach nearly 75% of total membership, compared with an industry average of 70%. Our teams remain highly focused on delivering a best-in-class consumer and clinical experience, and together with better benefit design and future stability, we believe these efforts will continue to stronger quality performance. We will continue to support the work related to CMS quality programs to ensure Medicare Advantage plans continue to provide quality experience and stability for the 36 million seniors who rely on them. Turning to medical costs. The actions we have taken to improve and modernize care management, strengthen clinical engagement, and enhance operational discipline are producing significant results. Care intensity remains elevated relative to historical norms, although we continue to see signs that trends are moving toward greater stability than in the recent past. We remain respectful of trends and do not assume they will slow relative to historical patterns, nor do we assume clinician pricing pressure will ease. Medical demand remains strong, especially among older and complex populations, and we fully support members receiving appropriate care. Turning to the commercial business. Performance continues to stabilize as we navigate a challenging market. As we have previously noted, commercial medical trends have exceeded the 11% we initially expected, driven by cost acceleration related to the No Surprises Act, higher cost intensity from clinicians, and high-cost specialty drugs. Particularly concerning is the continued abuse of the No Surprises Act dispute resolution process by a relatively small number of physician groups and third-party entities. In some regions, arbitration payouts can approach nearly 6% of total medical spending, meaning consumers, employers, and the healthcare system bear billions of dollars in excess costs. The original intent of the law was to protect patients from surprise bills, and we strongly support that goal. We will continue to work with policymakers and regulators to ensure the law operates as intended and that healthcare dollars go to appropriate patient care rather than dramatically inflated market arbitration payouts and arbitration volume, as well as unnecessary administrative expenses. Medicaid remained stable in the second half, and our teams continued to drive operational improvements through network selection and more effective behavioral health program initiatives. These actions partly offset the impact of the main variable, which remains the timing and adequacy of state funding in multiple markets. For the remainder of 2026, we will continue to work with our state partners to ensure rates appropriately reflect the disease severity and medical needs of the families served, including the impact of regulatory actions. Although many states have made progress, the timing of updates remains uneven. Based on our current outlook, we continue to view 2026 as the trough year for Medicaid core margins, and we now expect it to be slightly better than -1%. Finally, we are fully focused on strengthening support for and relationships with clinicians and the healthcare system. In addition to the prior authorization reforms Steve mentioned, which we believe are just the beginning, we are significantly accelerating claims processing and payment speed, and reorienting and revitalizing our physician relationship efforts with more dedicated resources and executive accountability. Our goal is to provide a smoother experience for the clinicians and health systems we work with and to resolve issues faster. Looking to 2027 and beyond, we are shifting our focus to sustainable organic growth, supported by improving Medicare fundamentals, a stronger commercial outlook, opportunities for continued Medicaid performance improvement, and an organization that operates with greater discipline and accountability for all stakeholders. Next, I will turn the call over to Patrick. Patrick Conway - Chief Executive Officer, Optum Thank you, Tim. Our third-quarter results highlight the important work underway across Optum that is laying the foundation for long-term growth. Starting with Optum Health. Overall, Optum Health continued to deliver strong performance in the third quarter, driven by a continued return to value-based care principles, combined with strong execution of our clinical programs and operational improvements that allow clinicians to focus more on patients and improve the patient experience. A few examples this morning: online self-scheduling increased 27% over last year, making it easier for patients to connect with clinicians; home health visits increased 10% over last year. We are very encouraged by the early results of our program co-locating behavioral health specialists within primary care clinics, where referrals doubled over last year and participation exceeded 90%. As Tim said, there is now a greater need than ever to provide seamless care and support for our chronic and complex patients across the continuum, from primary care to specialty care, to home, to pharmacy. Turning to Optum Rx. Our focus in this business remains on two things to ensure value alignment with the customers and patients we serve. First, we continue to enhance Optum Rx's transparency in the PBM space. Throughout the 2027 selling season, our industry-first affordability, experience, and transparency initiatives resonated in the market, and the customers, employers, governments, and unions we serve continue to recognize the critical role PBMs play in controlling prescription drug costs and ensuring people get the medications they need, especially as prices charged by drug manufacturers continue to rise. For the first time, more than 50% of Optum Rx members are external members, meaning non-UHC members. Second, we strongly believe pharmacy services must be closer to patients. So you will see continued efforts in our standalone pharmacy services business to bring pharmacy care and medical care more closely together. Integrated value-based care means integrated. When pharmacy care and medical care are aligned, the patients we serve see improved outcomes, better access, and lower overall healthcare costs. Specifically, on the pharmacy services side of Optum Rx, Genoa continues to expand its dedicated behavioral health pharmacy footprint, serving patients with serious mental illness and substance use disorders. Specialty pharmacy continues to expand through both volume and mix growth, while improving patient support for increasingly complex therapies. Infusion services are also becoming more important as we help shift appropriate care to lower-cost, more convenient settings. We will continue to expand our portfolio of integrated pharmacy services and bring them as close as possible to medical settings, delivering better care, convenience, and access. Turning to Optum Insight. 2026 is both an execution year and an investment year, with meaningful progress in 2027 that will lay the foundation for accelerated growth in 2028 and beyond. Our investments are focused on further developing and bringing to market purpose-built AI solutions for the healthcare industry to improve productivity, performance, and outcomes, while improving the patient and clinician experience. Overall, we look to 2027 with confidence. Our major remediation work is largely complete, laying a solid foundation for growth across Optum. Next, I will turn the call over to Wayne. Wayne DeVeydt - Chief Financial Officer Thank you, Patrick, and good morning, everyone. Third-quarter results reflect continued progress across the enterprise and improved execution in those businesses that have remained focused on operational reforms designed to deliver a better consumer and clinician experience. In the third quarter of 2026, we reported revenue of $113 billion and adjusted earnings per share of $4.69, up from $2.92 in the prior-year period. The consolidated medical loss ratio in the quarter was 88.4%, compared with 89.9% a year earlier. As we move toward 2027, earnings quality is strong and sustainable. At UnitedHealthcare, performance continued to reflect pricing discipline, underlying medical cost management, and care delivery improvements. We remain respectful of still-elevated utilization trends, which typically rise in the second half of the year, particularly in our risk-based businesses. At Optum Health, we saw steady progress from modernization, a return to disciplined value-based care, and operational improvements, with actions taken throughout 2026 beginning to produce results. At Optum Insight, performance benefited from technology and AI-driven improvements, including payment integrity and broader operational efficiency gains, while we invest in new areas to expand and modernize our products to drive growth. At Optum Rx, we continued to see the benefits of disciplined execution and the breadth of our pharmacy services model, which is now built on a simpler, more transparent way to serve these evolving market needs. Turning to the full year. Our updated 2026 adjusted earnings per share guidance of "at least $20.50" reflects third-quarter performance and is balanced with expected investments in the final months of the year. From a capital allocation perspective, our priorities remain consistent. First, reinvest in the business through targeted organic growth and disciplined expansion of care delivery, technology modernization, and broad AI adoption. Second, maintain a strong balance sheet. Third, return value to shareholders. Our balance sheet remains strong. The debt-to-capital ratio at quarter-end was 41.7%, and we remain on track to approach 40% by year-end. In the third quarter, we repurchased $5 billion of UNH stock. Year to date, we have paid $6.2 billion in dividends, and we expect that to exceed $8 billion by year-end. Our strategic focus remains on capabilities that align with and strengthen our ability to create value for consumers, benefit sponsors, and customers, while supporting long-term shareholder growth. We believe our 2026 adjusted earnings per share guidance of "at least $20.50" is a solid growth base. What we would say is that current analyst consensus for 2027 may underestimate the opportunity ahead, and we believe the lower end of the long-term 13% to 16% growth range is a more reasonable starting point. More broadly for 2027, we continue to see a balanced set of tailwinds and headwinds. Tailwinds include continued enterprise-wide improvement, share repurchases, improved value-based care performance, and further benefits from AI and modernization, which improve the consumer and clinician experience, drive productivity gains, lower costs, and create opportunities for sustainable performance improvement for our businesses and those we serve, while also creating product opportunities for Optum Insight. On headwinds, we will accelerate investments in policy reform and business modernization, especially at UnitedHealthcare and Optum Insight, while continuing to respect medical trends and the broader external environment, where healthcare benefit funding remains under pressure. Overall, we are steadily and methodically improving performance across the portfolio. We are positioned to finish 2026 strong and will remain focused on continuing to deliver our long-term growth target of 13% to 16%. Next, I will turn the call back to Steve. Stephen Hemsley - Chief Executive Officer and Non-Independent Non-Executive Chairman Thank you, Wayne. Before we move to Q&A, let me close with a few thoughts. Over the past year or so, our priorities have been clear: return to our core mission and culture; better serve healthcare needs as an enterprise and as a leadership team; rebuild financial and operational discipline; turn around and strengthen performance business by business and metric by metric; begin to reimagine and modernize everything we do to harness the remarkable potential of modern intelligent technology to simplify processes, improve service levels, and accelerate responsiveness and service to consumers and clinicians. Finally, reposition all businesses to return to responsible, profitable organic growth. As you heard today, we are deeply engaged in all of these areas, but fully realizing these priorities requires us to step outside our own "four walls." Across the company, we are taking time to listen carefully to customers, consumers, clinicians, policymakers, and other stakeholders. We do so with humility and a service mindset, recognizing the positive role we can play when we are at our best and our responsibility to improve the healthcare system experience. These conversations help reestablish and reinforce a fundamental understanding: success in healthcare depends on relationships and trust, and we need to continue building both with all stakeholders. We will continue to listen, continue to learn, and continue to advance the business in ways that improve the experience, provide greater accessibility and lower costs, while delivering better outcomes. And for our shareholders, all of these responsibilities are aligned with one another and create value. The progress we made in 2026 gives us confidence. Our businesses are improving, our modernization efforts are progressing, and our investments in AI and integrated value-based care are now delivering tangible benefits while positioning us for the future. We will remain focused on running the business better, finishing 2026 strong, and laying the foundation for growth in 2027, 2028, and beyond. We look forward to providing a more comprehensive update on next year's outlook before the end of the year. Thank you now. Operator, please open the line for questions. Q&A Session Operator [Operator Instructions] Our first question comes from Justin Lake with Wolfe Research. Justin Lake - Wolfe Research, LLC I want to start by focusing on the government business, particularly your comments on Medicaid. Things are improving. Could you talk about the third-quarter run rate and the drivers? Given your improvement, are you now back to roughly break-even? Also, please tell us where Medicare Advantage margins currently stand. Stephen Hemsley - Chief Executive Officer and Non-Independent Non-Executive Chairman Mike, do you want to take that? Michael Cotton - Chief Executive Officer, Medicaid Yes. Thank you, Justin, and thanks for the question. As Tim noted, our membership and overall disease severity are in line with expectations, and we now expect full-year 2026 performance to be slightly better than our previously forecast range. The main drivers of this performance are our focus on complex care cost management, network and service selection, improved member engagement, especially in our AI-driven coaching campaigns, modernization work, and continued identification and removal of fraud, waste, and abuse. We do believe these actions are sustainable. We saw good improvement in the third quarter and believe this trend will continue through the remainder of the year. We continue to see elevated trends in areas such as behavioral health services, specialty pharmacy services, and home and community services, as well as inpatient care costs. Those elevated levels are moderating slightly, and we are monitoring them closely. We expect margins to improve as we move into next year and will continue working with our state partners to mitigate the stubborn gap between funding and medical cost trends throughout the year. Again, with respect to 2028, we very much want to return to reasonable margin levels by the end of that year. Thank you for the question. Bobby Hunter - Chief Executive Officer, Government Programs and Head of Medicare Insurance Business Justin, I will take the Medicare margin part of that. Given our pace of progress in 2026, we now expect to be near the upper end of the 2% to 4% range. I would attribute a large part of that to the excellent remediation actions the team executed throughout the year, which I think centered on medical trends, our focus on cost management, and a broader focus on the sustainable product portfolio we brought to market for 2026. That also allows us to invest now to set up future success, such as our work in quality, AI, modernization, and physician collaboration. Ultimately, I think that positions us well for continued success in 2027. Thank you for the question. Operator Our next question comes from Lance Wilkes with Bernstein. Lance Wilkes - Bernstein Institutional Services LLC, Research Division Okay. Can you talk about how you are thinking about 2027 growth, particularly in Medicare Advantage, and given that you are approaching the upper end of the range, how are you thinking about growth there? Also, how is the selling season going for national accounts and PBM? Stephen Hemsley - Chief Executive Officer and Non-Independent Non-Executive Chairman Let's start with Bobby. Bobby Hunter - Chief Executive Officer, Government Programs and Head of Medicare Insurance Business Okay, thanks for the question, Lance. Yes, annual enrollment is almost here. Although we will not provide formal membership guidance until later this year, I can share a few early observations. Obviously, part of the work we did in planning for 2027 was to continue reviewing and ensuring we have a sustainable product portfolio, which means continuing to optimize footprint and products around the remaining PPO business that we began adjusting a year or two ago. But looking at where the opportunities are, I think there is actually a lot of good growth potential in the market. So maybe one important data point: even with some footprint optimization, we actually expanded our overall footprint. Tim mentioned this in his opening remarks. More than 94% of Medicare-eligible Americans can now choose one of our plans, which is an expansion versus last year. We also took a more dynamic approach to product planning this year. I think there is a real opportunity in the market today for smart, sustainable growth. We are especially focused on Dual Special Needs Plans, Chronic Special Needs Plans, and selected high-value HMOs. And I think as we enter the 2027 annual enrollment period, the conditions to capture growth in these key areas are better than in recent years, and we have adjusted our go-to-market strategy accordingly. Finally, one more point to emphasize: when I think about the capabilities of this enterprise as a whole, the capabilities we can bring to bear, and our emphasis on value-based care, I do think we have an excellent opportunity to make an impact for members who choose D-SNP, C-SNP, and HMO plans, and over time to deliver excellent outcomes and quality for these people. Stephen Hemsley - Chief Executive Officer and Non-Independent Non-Executive Chairman Great. Thank you, Bobby. Timothy Noel - Chief Executive Officer, UnitedHealthcare Okay, Lance, this is Tim. I will hand the microphone to Brandon Cuevas, our new CEO of the commercial business, to share some thoughts on the commercial selling season and our pricing posture there. Brandon Cuevas - Chief Executive Officer, Commercial Business No, thank you, Lance. Thanks for the question. We have just come through two very, very strong national account selling years. We are pleased to see that our renewal rates and group retention look very, very strong going into 2027. In terms of our pipeline and selling season, obviously we are well past the halfway point in national accounts, and we have had a very successful selling season this year. I think, when it comes to overall growth in the commercial business, we remain respectful of trends. We have to be very mindful of rising trends, while also being very clearly focused on affordability. Looking to 2026, we think our growth will reflect some of the upward trend pressure we see in the market. But our pipeline is building, and products like Surest and our middle-market sales progress are actually continuing to perform exceptionally well. So we have a fairly solid selling season going into 2027, although we are still in the middle of middle-market selling. Momentum in national accounts going into next year is very strong. Thank you for the question. Stephen Hemsley - Chief Executive Officer and Non-Independent Non-Executive Chairman Thank you, Brandon. And what about PBM, Jon? Jon Mahrt - Chief Growth Officer Okay, thank you, Steve. Lance, thanks for the question. Building on Brandon's comments, we have enjoyed strong selling seasons for two consecutive years, and we expect that trend to continue this year, driven primarily by the transformation and transparency modernization work within the PBM. These efforts have genuinely resonated in the market, fundamentally because every Optum Rx customer can benefit from the fully transparent supply chain tools we are building. As a result, this has driven retention, which again remains in the high 90% range this year. At the same time, as Patrick mentioned in his opening remarks, we have also been successful in the new customer market while maintaining pricing discipline. Our membership has now grown to more than 50% of covered lives, and we expect that trend to continue in 2027. As the year comes to a close, we remain closely engaged with customers. We are in the busiest part of the enrollment season. Brandon and I still have joint work underway. We will stay closely connected with these customers as we update our 2027 membership outlook. Thank you for the question. Operator Our next question comes from Stephen Baxter with Wells Fargo & Company. Stephen Baxter - Wells Fargo & Company Securities, Research Division To round out some of the 2027 information, I think you have been fairly clear on the health plan and PBM assumptions. Could you add some color on how you are thinking about revenue momentum at Optum Health and Optum Insight, and how you are repositioning those two businesses for growth in 2028 and beyond? Stephen Hemsley - Chief Executive Officer and Non-Independent Non-Executive Chairman Sure. Let's start with Krista, then Sandeep. Krista Nelson - Chief Executive Officer, Optum Health Okay. Thank you very much for the question, Stephen. I want to start by highlighting some of what we actually saw in the third quarter. Our clinical programs and medical management performed very strongly. As we move into 2027, these programs will continue to remain effective. The work we are doing includes reducing unnecessary hospitalizations, improving access to primary care and preventive care, and improving access to home health services to help serve patients in our communities and in the home setting. As we think about 2027, we will share more details in the coming months. But I think I am very confident in our ability to deliver profitable growth in 2027. Our focus will be on truly thoughtful growth. I might point to a few things as growth opportunities for this business in 2027 and really over the long term. First, we serve 20 million patients today, about 4 million of whom are in full-risk relationships. So there is still room to grow full-risk relationships, but more importantly, there is substantial opportunity in professional risk sharing, shared savings, and other ways we can serve patients in integrated models. Second, I would point to the high-performing service lines we have today. For example, home health, hospice, surgery centers, D-SNP, C-SNP, HMO. Again, there is substantial opportunity in these services to deepen in existing markets and serve more patients more comprehensively. Finally, I would also point to opportunities to launch new products in the market. Maybe one example. This year, we partnered with one of the payers to expand our ability to manage full-episode post-acute risk. That is, extending from inpatient care all the way through skilled nursing facilities (SNF) and home health. We are seeing very strong demand in the market for these products to comprehensively serve post-acute care risk. We are also very pleased with the results. We have seen improved timely access to care and improved use of home health services. I think you will see these kinds of programs expand in 2027 as well. So overall, ensuring we appropriately progress toward the 6% to 8% target margin range remains a multiyear journey, but we see ample growth opportunities within Optum Health. Stephen Hemsley - Chief Executive Officer and Non-Independent Non-Executive Chairman And you do have an appetite to do new things. Krista Nelson - Chief Executive Officer, Optum Health Exactly. Stephen Hemsley - Chief Executive Officer and Non-Independent Non-Executive Chairman Sandeep? Sandeep Dadlani - Executive Vice President and Chief Digital and Technology Officer Okay. Stephen, for Optum Insight, the goal is to simplify healthcare with AI, serving consumers, providers, payers, and life sciences companies. 2026 is proceeding as planned, and I would like you to think of Insight as a multiyear investment and execution journey. So there are several moving pieces here. We continue to review and exit unreasonable legacy products and contracts. But at the same time, we are infusing AI into existing products to make them more competitive and profitable, and launching new AI-first products and platforms. A few examples that show momentum: our Optum AI consulting team is working with a Medicaid plan to use agentic AI to help them adjudicate their most complex claims in seconds rather than days. Another example is a product called Optum Integrity One, which automates claims coding in the revenue cycle space. We launched it at the end of 2025 with only 2 customers; today, we have 15 customers implemented and another 24 in implementation. So you can see the momentum in some of our new AI customers. We also recently announced a partnership, joining the Anthropic partner network. In prior quarters, we announced similar go-to-market partnerships with Microsoft Corporation and Alphabet Inc. Class C across several products. We are seeing strong disciplined execution, new AI-first team members and new product teams, and so on. Over the next two quarters, we will see a series of product launches. So overall, putting these moving pieces together, we are confident in our 2027 outlook. Thank you. Stephen Hemsley - Chief Executive Officer and Non-Independent Non-Executive Chairman AI is reshaping that business. Operator Our next question comes from A.J. Rice with UBS Group AG. Albert Rice - UBS Group AG Investment Bank, Research Division I want to come back to the commercial business. On the risk-based portion, you have said it may be running at a margin level below 5%, partly due to the independent dispute resolution issue you mentioned. It sounds like you are saying today that this is stabilizing somewhat. I know you have said in the past that this business has high-single-digit margins, around 7% to 10%. I would like to hear your view on the pace of margin recovery there, and please talk a bit more about the stabilization you are currently seeing. Stephen Hemsley - Chief Executive Officer and Non-Independent Non-Executive Chairman Tim, do you want to start? Timothy Noel - Chief Executive Officer, UnitedHealthcare Okay, thank you, A.J. As we discussed in our opening remarks, we are seeing commercial medical cost trends stabilizing, albeit at elevated levels and significantly above the historical norms we have seen in the commercial business. In pricing for 2027, we are taking the view that these trends will persist and continue into 2027, and pricing rationally on that basis. When we think about the long-term target margin and some of the utilization pressure we face in the commercial business