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UnitedHealth Hit By $6.5 Billion Medical Cost Blowout: Launches AI-Led Overhaul, Drops 600K Members To Regain Margins — 'These Are Serious Challenges'

Healthcare company, UnitedHealth Group Inc. (NYSE:UNH), says that it will drop 600,000 Medicare Advantage members and launch a sweeping operational overhaul after being blindsided by $6.5 billion in unanticipated medical costs.

What Happened: During its second-quarter earnings call on Tuesday, UnitedHealthcare’s CEO, Tim Noel, said, “Our pricing assumptions were well short of actual medical costs.”

“We know these are serious challenges. We are humbled by them,” Noel says. As the company now expects the full-year Medicare Advantage trend, which refers to the year-over-year increase in healthcare costs per member, to be approximately 7.5%, well above the 5% trend it had assumed when setting 2025 bids.

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Under Medicare Advantage, private insurers such as UnitedHealth get paid a fixed amount by the U.S. Government, per enrollee, to manage their care.

“Physician and outpatient care together represent 70% of the pressure year to date,” Noel said. “In short, most encounters are intensifying in services and ...