UnitedHealth's commercial insurance segment is facing persistently high medical costs that management now says will push full margin recovery beyond 2027. Medical cost trends in the commercial business are running modestly above 11%, and executives attribute at least 100 basis points of total cost to the independent dispute resolution process under the federal No Surprises Act, which they say is being leveraged aggressively by select provider groups. While the company's Medicare and Optum units are performing well and the stock trades near 52-week highs at a price-to-earnings multiple of 32.1, the commercial cost pressures are not moderating and in fact are worsening, according to management. The premium valuation leaves little room for disappointment if the commercial recovery takes longer than investors expect.
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Elevance Health IncUnitedHealth Group IncorporatedUnitedHealth's commercial cost trends are worsening, delaying margin recovery beyond 2027, with 100 bps from No Surprises Act.