What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-11 compared with 2025-05-07 · 83 added, 52 removed, 224 unchanged (38% of the section changed)

19 unchanged sentences

To price our health care benefits, products and services, we start with our view of expected future costs, including medical care patterns, the mix and health status of people served, inflation and labor market dynamics.

We frequently evaluate and adjust our approach in each of the local markets we serve, considering relevant factors, such as product positioning, price competitiveness and environmental, competitive, legislative and regulatory considerations, including minimum medical loss ratio thresholds and similar revenue adjustments.

We will continue seeking to balance growth and profitability across all these dimensions.

For 2025, our pricing trends and patient and member health status assumptions were well-short of the medical cost trends incurred, significantly impacting our earnings.

We continually evaluate and adjust our approach in each of the local markets we serve, considering relevant factors, such as product positioning, price competitiveness and environmental, competitive, legislative and regulatory considerations, including minimum medical loss ratio thresholds and similar revenue adjustments.

We seek to balance growth and profitability across all these dimensions.

The commercial risk market remains highly competitive in the small group, large group and individual segments.

We expect broad-based competition to continue as the industry adapts to individual and employer needs.

Medicare Advantage funding continues to be pressured, as discussed below in “ R egulatory Trends and Uncertainties” and we have observed increased care patterns as discussed below in “Medical Cost Trends,” which may impact pricing and benefit design in future periods.

Continued increased medical costs may impact both future pricing and benefit design, including for our individual exchange products in markets we choose to remain, and result in shifts between product categories for our employer benefits.

These potential changes, along with certain regulatory impacts, may result in decreased membership in future periods.

Medicare Advantage funding continues to be pressured, as discussed below in “Regulatory Trends and Uncertainties” and we have observed increased care patterns as discussed below in “Medical Cost Trends,” which may impact pricing and benefit design in future periods.

Optum Health’s fully accountable value-based care businesses have been impacted by Medicare funding reductions and have also seen continued medical cost trend pressures, which may impact future pricing in the markets we continue to participate.

The Medicaid redetermination process has caused a timing mismatch between the health status of people served through Medicaid and state rate updates.

While the updated rates in 2025 more closely align with underlying member acuity, the funding and payment rate environment remains insufficient to meet the health needs of patients and creates the risk of continued downward pressure on Medicaid margin percentages.

Due to elevated care activity, specifically related to behavioral, pharmacy and home health, there continues to be a mismatch between the updated rates in 2025 and underlying member acuity.

The funding and payment rate environment remains insufficient to meet the health needs of patients and creates the risk of continued downward pressure on Medicaid margin percentages.

We continue to take a prudent, market-sustainable posture for both new business and maintenance of existing relationships.

We continue to advocate for actuarially sound rates commensurate with our medical cost trends and we remain dedicated to partnering with those states that are committed to the long-term viability of their programs.

Additionally, we expect some Medicaid membership losses in 2026 as a result of early adoption of recent legislation.

Medical Cost Trends.

Our medical cost trends primarily relate to changes in unit costs, care activity and prescription drug costs.

We have observed increased care patterns, more notably related to physician and outpatient care for seniors served through Medicare Advantage, that are above what we expected and contemplated in our benefits design.

These elevated care patterns may continue in future periods.

Additionally, the Inflation Reduction Act (IRA) altered the Medicare Part D model and benefits, shifting more risk to plans, which results in both increased premiums and medical costs.

We have observed increased care patterns, more notably related to physician and outpatient care, and to a lesser extent inpatient and emergency room utilization, that are above what we expected and contemplated in our pricing and benefits design.

We have also observed an increase in health care unit costs and the intensity of services delivered, driven by increases in provider pricing and additional services bundled per visit.

Additionally, the member profile of newly added patients under value-based care arrangements, people served in Medicare Advantage in markets where other plans exited, and peopled served within our individual exchange business has contributed to increased medical costs.

These trends may continue in future periods.

The Inflation Reduction Act (IRA) altered the Medicare Part D model and benefits, shifting more risk to plans, which results in both increased premiums and medical costs.

The IRA also changed the quarterly relationship of medical costs to premiums, altering the seasonal progression and creating a more consistent relationship between medical costs and premiums throughout the year.

We endeavor to mitigate medical cost increases by engaging hospitals, physicians and consumers with information and helping them make clinically sound choices, with the objective of helping them achieve high-quality, affordable care.

Additionally, we have elevated our audit, clinical policy and payment integrity tools to protect customers and patients from unnecessary costs.

Regulatory Trends and Uncertainties

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Medicare Advantage rate notices for numerous years have resulted in industry base rates well below the industry forward medical cost trend, with the Final Notice for 2026 beginning to approach the industry forward medical cost trend.

The compounding impact of the previous multi-year rate shortfalls creates sustained pressure on the Medicare Advantage program.

Additionally, increased medical costs in 2025, which are significantly above initial cost trend estimates, adds to the compounding impact of the previous multi-year rate shortfalls creating sustained pressure on the Medicare Advantage program.

Further, substantial revisions to the risk adjustment model, which serves to adjust rates to reflect a patient’s health status and care resource needs, have and will result in reduced funding and potentially benefits for people, especially those with some of the greatest health and social challenges.

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SELECTED OPERATING PERFORMANCE AND OTHER SIGNIFICANT ITEMS

The following summarizes select first quarter 2025 year-over-year operating comparisons to first quarter 2024 and other financial results.

The following summarizes select second quarter 2025 year-over-year operating comparisons to second quarter 2024 and other financial results.

• Consolidated revenues grew 13%, UnitedHealthcare revenues grew 17% and Optum revenues grew 7%.

• UnitedHealthcare served 945,000 more people, driven by growth in commercial offerings and Medicare Advantage.

• Consolidated earnings from operations of $9.1 billion compared to $7.9 billion last year, with 2024 impacted by the Change Healthcare cyberattack.

• UnitedHealthcare served 1.0 million more people, driven by growth in Medicare Advantage and commercial offerings.

• Consolidated earnings from operations of $5.2 billion compared to $7.9 billion last year, with 2025 impacted by elevated medical cost trend and 2024 impacted by the Change Healthcare cyberattack.

• Diluted earnings per common share was $3.74.

• Cash flows from operations for the three months ended March 31, 2025 were $5.5 billion.

• Cash flows from operations for the six months ended June 30, 2025 were $12.6 billion.

RESULTS SUMMARY

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(in millions, except percentages and per share data) Three Months Ended

March 31, Increase/

June 30, Increase/

(Decrease) Six Months Ended

June 30, Increase/

2025 2024 2025 vs.

2024 2025 2024 2025 vs.

Premiums $ 87,905 $ 76,897 $ 11,008 14 % $ 174,439 $ 154,885 $ 19,554 13 %

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Interest expense (1,027) (985) (42) 4 (2,025) (1,829) (196) 11

Loss on sale of subsidiary and subsidiaries held for sale (15) (7,086) 7,071 nm

Earnings before income taxes 8,106 1 8,105 nm

Loss on sale of subsidiary and subsidiaries held for sale (41) (1,225) 1,184 (97) (56) (8,311) 8,255 (99)

Earnings before income taxes 4,082 5,665 (1,583) (28) 12,188 5,666 6,522 115

Provision for income taxes (510) (1,244) 734 (59) (2,142) (2,466) 324 (13)

Net earnings (loss) 6,474 (1,221) 7,695 nm

Net earnings 3,572 4,421 (849) (19) 10,046 3,200 6,846 214

Earnings attributable to noncontrolling interests (166) (205) 39 (19) (348) (393) 45 (11)

Net earnings (loss) attributable to UnitedHealth Group common shareholders $ 6,292 $ (1,409) $ 7,701 nm

Diluted earnings (loss) per share attributable to UnitedHealth Group common shareholders $ 6.85 $ (1.53) $ 8.38

Net earnings attributable to UnitedHealth Group common shareholders $ 3,406 $ 4,216 $ (810) (19) % $ 9,698 $ 2,807 $ 6,891 245 %

Diluted earnings per share attributable to UnitedHealth Group common shareholders $ 3.74 $ 4.54 $ (0.80) $ 10.61 $ 3.02 $ 7.59

Medical care ratio (a) 89.4 % 85.1 % 4.3 % 87.1 % 84.7 % 2.4 %

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Operating margin 4.6 8.0 (3.4) 6.5 8.0 (1.5)

Tax rate 20.1 nm nm

Tax rate 12.5 22.0 (9.5) 17.6 43.5 (25.9)

Net earnings margin (b) 3.1 4.3 (1.2) 4.4 1.4 3.0

Return on equity (c) 26.8 % nm nm

nm = not meaningful

Return on equity (c) 14.4 % 19.2 % (4.8) 20.6 % 6.4 % 14.2

(a) Medical care ratio (MCR) is calculated as medical costs divided by premium revenue.

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Consolidated Financial Results

The increases in revenues were primarily driven by growth across our UnitedHealthcare domestic offerings and Optum Rx and pricing trends.

The increases in revenues were primarily driven by growth in people served through Medicare Advantage and those with higher acuity needs within Medicaid, growth at Optum Rx and pricing trends.

Medical Costs and MCR

Medical costs increased primarily due to growth in people served through Medicare Advantage, domestic commercial offerings and those with higher acuity needs;

the IRA-driven impacts on Medicare Part D plans and elevated care patterns.

The MCR increased as a result of the revenue effects of the Medicare funding reductions, the member profile of newly added patients under value-based care arrangements and elevated care patterns for seniors served through Medicare Advantage, partially offset by the seasonal impacts of the IRA on Medicare Part D and the incremental medical costs for accommodations made to care providers as a results of the Change Healthcare cyberattack incurred in 2024.

Medical costs increased primarily due to the IRA-driven impacts on Medicare Part D plans, elevated medical cost trend and growth in people served through Medicare Advantage and those with higher acuity needs.

The MCR increased as a result of the revenue effects of the Medicare funding reductions;

elevated medical cost trend;

the member profile of newly added patients under value-based care arrangements;

and the impacts of market morbidity changes on our individual exchange offerings, including the acceleration of anticipated future losses related to the second half of 2025;

partially offset by the incremental medical costs for accommodations made to care providers as a results of the Change Healthcare cyberattack incurred in 2024.

For the three months ended June 30, 2025, the MCR also increased due to the seasonal impacts of the IRA on Medicare Part D.

Operating Cost Ratio

The operating cost ratio decreased primarily due to operating cost management;

revenue impacts of government programs, including the IRA-driven impacts on Medicare Part D plans;

and our direct response efforts to the Change Healthcare cyberattack incurred in 2024, partially offset by investments to support future growth.

The operating cost ratio decreased primarily due to revenue impacts of government programs, including the IRA-driven impacts on Medicare Part D plans, operating cost management and our direct response efforts to the Change Healthcare cyberattack incurred in 2024, partially offset by investments to support future growth.

The effective income tax rate decreased due to tax benefits having significantly more impact due to lower pre-tax income in 2025, taxable earnings mix and the impact of the updated full year effective tax rate expectation.

For the six months ended June 30, 2025, the tax rate was also lower due to non-deductible losses on the sale of subsidiary and subsidiaries held for sale in 2024.

Reportable Segments

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The following table presents a summary of the reportable segment financial information:

Three Months Ended March 31, Increase/

Three Months Ended

June 30, Increase/

(Decrease) Six Months Ended

June 30, Increase/

(in millions, except percentages) 2025 2024 2025 vs.

2024 2025 2024 2025 vs.

UnitedHealthcare $ 86,103 $ 73,866 $ 12,237 17 % $ 170,720 $ 149,223 $ 21,497 14 %

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Three Months Ended

March 31, Increase/

June 30, Increase/

(Decrease) Six Months Ended

June 30, Increase/

(in millions, except percentages) 2025 2024 2025 vs.

2024 2025 2024 2025 vs.

UnitedHealthcare Employer & Individual - Domestic $ 18,950 $ 18,646 $ 304 2 % $ 38,016 $ 36,485 $ 1,531 4 %

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The following table summarizes the number of people served by our UnitedHealthcare businesses, by major market segment and funding arrangement:

March 31, Increase/(Decrease)

June 30, Increase/(Decrease)

(in thousands, except percentages) 2025 2024 2025 vs.

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South American businesses held for sale 1,165 1,330 (165) (12) %

UnitedHealthcare’s revenues increased due to growth in the number of people served through Medicare Advantage, fee-based commercial offerings and those with higher acuity needs and the IRA-driven impacts on Medicare Part D plans, partially offset by decreased people served through risk-based commercial offerings and Medicaid redeterminations throughout 2024.

Earnings from operations increased primarily due to growth in people served in Medicare Advantage, the seasonal impact of the IRA on Medicare Part D and the incremental medical costs for accommodations to support care providers as a result of the Change Healthcare cyberattack incurred in 2024, partially offset by the impacts of Medicare Advantage funding reductions and elevated care patterns for seniors served through Medicare Advantage.

UnitedHealthcare’s revenues increased due to the IRA-driven impacts on Medicare Part D plans and growth in the number of people served through Medicare Advantage, fee-based commercial offerings and those with higher acuity needs, partially offset by decreased people served through risk-based commercial offerings.

Earnings from operations decreased primarily due to the impacts of Medicare Advantage funding reductions, elevated medical cost trend, the impacts of market morbidity changes on our individual exchange offerings, including the acceleration of anticipated future losses related to the second half of 2025 and other write-offs and settlements, partially offset by the incremental medical costs for accommodations to support care providers as a result of the Change Healthcare cyberattack incurred in 2024.

For the six months ended June 30, 2025, decreased earnings from operations was also partially offset by the seasonal impact of the IRA on Medicare Part D.

Total revenues increased primarily due to growth at Optum Rx, partially offset by Optum Health.

Earnings from operations increased due to the impacts of the Change Healthcare cyberattack incurred in 2024 and growth at Optum Rx.

Earnings from operations decreased due to Optum Health, partially offset by the impacts of the Change Healthcare cyberattack incurred in 2024 and Optum Rx.

The results by segment were as follows:

Revenues at Optum Health decreased primarily due to the conversion of risk-based contracts, Medicare Advantage funding reductions and the profile of members served, partially offset by growth in patients served under value-based arrangements.

Earnings from operations decreased due to Medicare Advantage funding reductions, the member profile of newly added patients under value-based care arrangements and elevated care patterns for seniors served through Medicare Advantage, partially offset by cost management initiatives and the incremental medical costs for accommodations to support care providers as a result of the Change Cyberattack incurred in 2024.

Optum Health served approximately 99 million people and 104 million people as of March 31, 2025 and March 31, 2024, respectively.

Earnings from operations decreased due to Medicare Advantage funding reductions, the member profile of newly added patients under value-based care arrangements, elevated medical cost trends and contractual settlements, partially offset by cost management initiatives.

For the six months ended June 30, 2025, decreased earnings from operations was also partially offset by the incremental medical costs for accommodations to support care providers as a result of the Change Healthcare cyberattack incurred in 2024.

Optum Health served approximately 98 million people and 104 million people as of June 30, 2025 and June 30, 2024, respectively.

Optum Insight

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Earnings from operations also increased due to operating cost efficiencies.

Optum Rx fulfilled 408 million and 395 million adjusted scripts in the first quarters of 2025 and 2024, respectively.

Optum Rx fulfilled 414 million and 399 million adjusted scripts in the second quarters of 2025 and 2024, respectively.

LIQUIDITY, FINANCIAL CONDITION AND CAPITAL RESOURCES

Summary of our Major Sources and Uses of Cash and Cash Equivalents

Three Months Ended March 31, Increase/(Decrease)

Six Months Ended June 30, Increase/(Decrease)

(in millions) 2025 2024 2025 vs.

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Customer funds administered — 990 (990)

Sales and maturities of investments, net of purchases 1,217 492 725

Repayments of care provider loans - cyberattack 1,293 604 689

Sales and maturities of investments, net of purchases 1,327 — 1,327

Total sources of cash 17,411 23,018 (5,607)

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Cash paid for acquisitions and other transactions, net of cash assumed (734) (3,031) 2,297

Purchases of investments, net of sales of maturities — (221) 221

Purchases of property, equipment and capitalized software (1,784) (1,596) (188)

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Loans to care providers - cyberattack — (8,100) 8,100

Customer funds administered (25) — (25)

Other (2,131) (2,166) 35

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Increased cash flows provided by operating activities were driven by changes in working capital accounts, the seasonal impact of the IRA on Medicare Part D and the impacts of the Change Healthcare cyberattack incurred in 2024.

Other significant changes in sources or uses of cash year-over-year included net repayments of loans to care providers in response to the Change Healthcare cyberattack, decreased cash paid for acquisitions and increased net sales and maturities of investments, offset by decreased net issuances of short-term borrowings and long-term debt and decreased customer funds administered.

Financial Condition

As of March 31, 2025, our cash, cash equivalent, available-for-sale debt securities and marketable equity securities balances of $79.1 billion included approximately $30.7 billion of cash and cash equivalents (of which $1.5 billion was available for general corporate use), $46.4 billion of debt securities and $1.9 billion of investments in marketable equity securities.

As of June 30, 2025, our cash, cash equivalent, available-for-sale debt securities and marketable equity securities balances of $77.3 billion included approximately $28.6 billion of cash and cash equivalents (of which $3.3 billion was available for general corporate use), $46.6 billion of debt securities and $2.1 billion of investments in marketable equity securities.

Given the significant portion of our portfolio held in cash and cash equivalents, we do not anticipate fluctuations in the aggregate fair value of our financial assets to have a material impact on our liquidity or capital position.

Our available-for-sale debt securities portfolio had a weighted-average duration of 4.2 years and a weighted-average credit rating of “Double A” as of March 31, 2025.

Our available-for-sale debt securities portfolio had a weighted-average duration of 4.3 years and a weighted-average credit rating of “Double A” as of June 30, 2025.

When multiple credit ratings are available for an individual security, the average of the available ratings is used to determine the weighted-average credit rating.

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A summary of our cash requirements as of December 31, 2024 was disclosed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2024 10-K.

During the three months ended March 31, 2025, there were no material changes to this previously disclosed information outside the ordinary course of business.

During the six months ended June 30, 2025, there were no material changes to this previously disclosed information outside the ordinary course of business.

We believe our capital resources are sufficient to meet future, short-term and long-term, liquidity needs.

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Our revolving bank credit facilities provide liquidity support for our commercial paper borrowing program, which facilitates the private placement of unsecured debt through independent broker-dealers, and are available for general corporate purposes.

For more information on our commercial paper and bank credit facilities, see Note 5 of the Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this report and Note 8 of Notes to the Consolidated Financial Statements included in Part II, Item 8, “Financial Statements and Supplementary Data” in our 2024 10-K.

As of March 31, 2025, we were in compliance with the various covenants under our bank credit facilities.

For more information on our commercial paper and bank credit facilities, see Note 8 of Notes to the Consolidated Financial Statements included in Part II, Item 8, “Financial Statements and Supplementary Data” in our 2024 10-K.

As of June 30, 2025, we were in compliance with the various covenants under our bank credit facilities.

Long-Term Debt.

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Credit Ratings.

Our credit ratings as of March 31, 2025 were as follows:

Our credit ratings as of June 30, 2025 were as follows:

Moody’s S&P Global Fitch A.M.

Ratings Outlook Ratings Outlook Ratings Outlook Ratings Outlook

Senior unsecured debt A2 Stable A+ Stable A Stable A Stable

Senior unsecured debt A2 Negative A+ Negative A Stable A Negative

Commercial paper P-1 n/a A-1 n/a F1 n/a AMB-1+ n/a

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A significant downgrade in our credit ratings or adverse conditions in the capital markets may increase the cost of borrowing for us or limit our access to capital.

Regulatory Capital.

As a result of an increased MCR impacting our regulated insurance and HMO subsidiaries, the specified levels of required statutory capital required to be maintained are expected to increase.

While we continue to maintain significant levels of excess statutory capital in our subsidiaries, the amount of dividends our subsidiaries are able to pay to their parent companies during the remainder of 2025 may be impacted.

During the six months ended June 30, 2025, our domestic insurance and HMO subsidiaries paid their parent companies dividends of $1.9 billion.

Share Repurchase Program.

During the three months ended March 31, 2025, we repurchased approximately 6.0 million shares at an average price of $503.72 per share.

As of March 31, 2025, we had Board of Directors’ authorization to purchase up to 27 million shares of our common stock.

During the six months ended June 30, 2025, we repurchased approximately 12.1 million shares at an average price of $454.82 per share.

As of June 30, 2025, we had Board of Directors’ authorization to purchase up to 21.0 million shares of our common stock.

The Board of Directors from time to time may further amend the share repurchase program in order to increase the authorized number of shares which may be repurchased under the program.

Our quarterly cash dividend to shareholders reflects an annual rate of $8.40.

In June 2025, our Board of Directors increased our quarterly cash dividend to an annual rate of $8.84 compared to $8.40 per share, which we had paid since June 2024.

For more information on our dividend, see Note 6 of Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this report.

Pending Acquisitions.

As of March 31, 2025, we have entered into agreements to acquire companies in the health care sector, subject to regulatory approval and other customary closing conditions.

As of June 30, 2025, we have entered into agreements to acquire companies in the health care sector, subject to regulatory approval and other customary closing conditions.

The total anticipated consideration required for these acquisitions, excluding the payoff of acquired indebtedness, was approximately $4 billion.

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changes in Medicare, the CMS star ratings program or the application of risk adjustment data validation audits;

the DOJ’s legal action relating to the risk adjustment submission matter;

the DOJ’s legal actions concerning our participation in the Medicare program;

our ability to maintain and achieve improvement in quality scores impacting revenue;

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis