UNH Battles MCR, Optum Bandages: But the Real Wild Card is Washington

Core Insights - UnitedHealth Group Incorporated (UNH) is experiencing increased pressure on profitability due to a rising medical care ratio (MCR), which reached 89.9% in Q3 2025, up from 85.2% a year prior, driven by persistent medical inflation and unpredictable utilization trends [1][8] - The Optum division is a significant growth driver, with revenues increasing by 8.2% year over year to $69.2 billion, representing over 61% of total company sales [1][8] - Regulatory scrutiny surrounding Optum Rx, the pharmacy benefit management arm, has raised concerns among investors, as any potential regulatory actions could impact the broader business [2][8] Company Performance - The MCR increase is pressuring profitability, with Optum Rx contributing 57.4% of Optum's revenues [2][8] - The Zacks Consensus Estimate for UnitedHealth's 2025 earnings is projected at $16.29 per share, indicating a 41.1% decline from the previous year [11] - UnitedHealth's stock has declined by 34.8% year-to-date, compared to a 29% decline in the industry [7][8] Industry Context - Peers such as Centene Corporation and Elevance Health are also facing challenges from rising medical costs, leading to downward revisions in their 2025 outlooks [5][6] - Centene's health benefits ratio increased to 92.7%, reflecting a 27% rise in medical expenses, while Elevance's benefit expense ratio rose to 91.3% [6] - The expiration of enhanced Affordable Care Act subsidies at year-end could lead to higher premiums for millions, prompting potential shifts in enrollment patterns across insurance products [3][4]