Jan 27 (Reuters) - UnitedHealth UNH.N on Tuesday forecast 2026 adjusted profit slightly above analysts' estimates, in a sign that medical cost-control measures under CEO Stephen Hemsley were beginning to reap results.
Hemsley, who returned as CEO in May to restore investor and consumer trust in the healthcare behemoth, has been working to steer the company out of a difficult period that included the murder of a top executive, a surge in medical costs, a federal probe, and Americans' anger at insurance industry practices.
The company has been aiming for a return to growth in 2026, but expects a challenging recovery in its Medicaid business for lower-income Americans due to a mismatch between payment rates and costs for medical services. It has also pulled back on Medicare Advantage offerings for older adults.
The U.S. on Monday proposed an average rate increase of 0.09% in payments to private insurers next year for the Medicare Advantage plans they manage, far below Wall Street's expectations.
This sent shares of top insurers Humana HUM.N, CVS Health CVS.N and UnitedHealth down more than 8% before the bell.
CMS typically finalizes Medicare Advantage rates in early April. If the current proposal holds, the rate increase would result in more than $700 million in payments to Medicare Advantage plans in 2027.
UnitedHealth sees annual profit per share of greater than $17.75, compared with analysts' average estimate of $17.74, according to data compiled by LSEG.
The company has struggled with higher costs across government-backed plans for over two years, driven by increased utilization of behavioral health services, specialty drugs and home-health services.
For the year, adjusted medical care ratio - the percentage of premiums spent on medical care - was 88.9% compared with 85.5% in 2024. Analysts on average had expected 89.1% for 2025.
The increase was driven by a reduction in Medicare funding, changes from the Inflation Reduction Act combined with accelerating medical cost trends, the company said.
On an adjusted basis, UnitedHealth earned a fourth-quarter profit of $2.11 per share, compared with analysts' average estimate of $2.10, according to data compiled by LSEG.
(Reporting by Sriparna Roy and Sneha S K in Bengaluru; Editing by Shinjini Ganguli)
((Sriparna.Roy@thomsonreuters.com))