UnitedHealth says aggressive billing, pharmacy drugs drove medical costs up in Q2

UnitedHealth Group reported better-than-expected earnings on July 16, bringing in $5.5 billion in net income during the second quarter, up from $3.4 billion during the same period last year. Its revenue went up to $112 billion, from $111 billion the previous year.

But the insurance giant, which saw its stock rise 7% on the news, also warned that rising medical costs in the commercial market were not yet under control. As a result, employers contracting with UnitedHealth (UHC) are unlikely to see relief from high prices anytime soon.

“We are not yet seeing evidence of cost trend moderation,” Tim Noel, CEO of UnitedHealthcare, said of UHC’s commercial offerings. “In fact, it is the opposite, with medical cost trends modestly above 11% level we previously saw.” He added he expected recovery of commercial profit margins to “remain a focus area longer than originally anticipated.”

Noel pointed to knock-on effects of the No Surprises Act—which is intended to protect patients from surprise billing—as well as more aggressive billing practices among providers, as primary culprits of this still-high cost trend.

The No Surprises Act, which was enacted in 2022, limits how much patients pay for care in cases where they are “unknowingly, and potentially unavoidably, treated by out-of-network (OON) providers,” according to a briefing from the Congressional Research Service. The law, which applies to employer-sponsored plans, also established an independent dispute resolution (IDR) process for insurers or providers to determine how much should be paid for these out-of-network services.

That process “is being exploited by select providers in select geographies,” and in turn contributing to higher costs, Daniel Kueter, CEO of UnitedHealthcare Employer & Individual, said on the earnings call.

Research briefings from institutions including Georgetown University and the University of Pennsylvania indicate that the No Surprises Act has actually driven medical costs higher because providers tend to win disputes that enter into IDR arbitration (80% of the time), and in turn collect higher payments than they would have under the standard commercial insurance system. Given these concerns, the Congressional Budget Office said in June that it’s seeking additional research on the policy.

Kueter also provided additional details on factors that are likely more familiar to HR and benefits leaders navigating high health costs. Pharmacy costs continue to reflect “both higher net costs and growth of newly covered indications,” he said, pointing to examples like anti-inflammatory and GLP-1 medications.

Employers are expected to see health costs rise between 6% to 9% in 2026, according to estimates from organizations like Mercer and the Business Group on Health. HR leaders are exploring a variety of strategies to contain healthcare inflation, including cutting out insurers entirely and contracting directly with providers instead, as well as reimbursing employees to buy their own plans on the individual marketplace.

HR pros may get a fuller picture of where major insurers see health costs headed when Cigna and CVS Health, which owns Aetna, report earnings later this summer. At a July 9 event at the Economic Club in Washington, DC the CEO of CVS, David Joyner, said he believed Aetna had a better handle on “how to project and predict where healthcare costs are going, and making sure we’re pricing our products accordingly.”