Note: This is a preliminary transcript and may contain inaccuracies. It will be updated with a final, fully-reviewed version soon.
UnitedHealth Group Incorporated (NYSE: UNH) Q1 2026 Earnings Call dated Apr. 21, 2026
Corporate Participants:
Stephen Hemsley — Chairman and Chief Executive Officer
Timothy Noel — Chief Executive Officer of UnitedHealthcare Business
Patrick Conway — Chief Executive Officer of Optum Rx
Wayne DeVeydt — Chief Financial Officer
Krista Nelson — Chief Executive Officer of UnitedHealthcare Community & State
Bobby Hunter — Chief Executive Officer of Government Programs & Head of Medicare Insurance
Sandeep Dadlani — Executive Vice President and Chief Digital & Technology Officer
Analysts:
AJ Rice — Analyst
Kevin Fischbeck — Analyst
Andrew Mok — Analyst
Justin Lake — Analyst
Stephen Baxter — Analyst
Lisa Gill — Analyst
Unidentified Participant
David Windley — Analyst
Ann Hynes — Analyst
Erin Wright — Analyst
George Hill — Analyst
Unidentified Participant
Sarah James — Analyst
Presentation:
Operator
Good morning and welcome to the UnitedHealth Group first quarter 2026 earnings conference call. A question and answer session will follow UnitedHealth Group’s prepared remarks. As a reminder this call is being recorded. Here is some important introductory information. This call contains forward looking statements under US Federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations.
A description of some of the risks and uncertainties can be found in the reports that we file with the securities and Exchange Commission, including the cautionary statements included in our current and periodic filings. This call will also reference non GAAP amounts. A reconciliation of the non GAAP to GAAP amount is available on the Financial and Earnings Report section of the Company’s Investor relations page at www.unitedhealthgroup.com. Information presented on this call is contained in the earnings release we issued this morning and in our Form 8K dated April 21, 2026, which may be accessed from the Investor Relations page of the Company’s website.
I will now turn the conference over to the Chairman and Chief executive officer of UnitedHealth Group, Stephen Hemsley.
Stephen Hemsley — Chairman and Chief Executive Officer
Thank you Lisa, Good morning and thank you for joining us today. The first quarter unfolded largely as expected, reflecting actions taken in the past several months to drive consistent performance across each business. The quarter saw continued progress in advancing our organization, performance culture and better business practices. All of our major business segments exceeded plan for the quarter. At UnitedHealthcare, pricing is improving relative to elevated healthcare cost trends and affordability initiatives are generating positive momentum.
At Optum Health, operational improvements continue to take hold as we more deeply embed disciplined, integrated value based care practices market by market. Optum Insight is seeing increased market interest with its AI First Enterprise approach. Tim Noel and Patrick Conway will discuss these efforts in more detail in a minute. We’re encouraged by the way the year has started. We remain grounded in the need for consistent execution in managed care fundamentals and on a strategy to help build an integrated value based health system that together makes things better and simpler for care providers, patients and customers.
We are investing in AI enabled modernization. While early, these capabilities are already improving experiences for consumers and care providers, increasing productivity and reducing administrative burden. The application of technology has long been foundational to how this enterprise operates and how we can help others across the health system improve their operations. Through Optum Insight, we remain on track to invest nearly 1.5 billion in AI related initiatives in 2026. I hope our conversation today gives you a sense of the momentum building at our company and the steps we’ve taken to strengthen the enterprise and position it for long term success.
We have refocused the organization squarely on US healthcare exiting non US businesses. We’ve refreshed nearly half of our top 100 leadership roles, our accelerated technology and AI investments are showing meaningful potential and we’re actively evolving business practices in areas such as data and processing, interoperability and speed, pharmacy practices, prior authorization, product and reporting, transparency, and management practices more broadly. At the corporate level, we strengthened governance by creating a Public Responsibility Committee of the Board, naming a new lead, Independent Director and new Committee Chairs, adding a new independent director and accelerating our board recruiting process.
And we’ve redoubled community engagement and support with renewed focus and resources to the UnitedHealth foundation and an expanding commitment to improving rural healthcare, expanding the healthcare workforce, strengthening maternal and children’s health, addressing the challenges of behavioral health and more. We strive to be an organization of people organization of people proud to work for and with these efforts and others will remain central to those goals. With that, I’ll turn it over to Tim and Patrick to provide insights on our quarter and goals for the remainder of the year.
Tim
Timothy Noel — Chief Executive Officer of UnitedHealthcare Business
Thanks Steve. As Steve said, the actions initiated last year are driving early momentum in UnitedHealthcare, both in our business results and in the experiences members and care providers have when they engage with us. Medicare and retirement results reflect disciplined pricing strengthened by affordability initiatives in an elevated but stable medical trend environment. Community and state results continue to reflect the pressures in state based rate environments, but were within the overall expected range.
Commercial and ACA results were consistent with pricing and trend assumptions, albeit still early in the year. Our 2026 approach prioritized margin recovery and product stability with a deliberate trade off on membership growth, particularly in Medicare and commercial markets. Care utilization trends in the quarter remained consistent with our expectations for 2026. The quarter’s medical cost performance overall was driven primarily by net reserve development, better mix, and enrollment dynamics in government programs.
As we monitor underlying utilization trends, they remain consistent with the high levels we saw in the prior year. At this distance, we anticipate trend to remain at the anticipated levels for 2026. In Medicaid, we remain focused on improvements in high acuity care management and operating cost management. First quarter performance reflected a combination of favorable reserve development and early in year medical cost experience. We continue to expect membership attrition and negative margins in 2026 in light of continuing high trend and insufficient funding with modest margin improvements beginning in 2027.
Many state rate processes are still open for the remainder of 2026 and into 2027. Appropriately aligning state rates to elevated medical cost trends in these programs is essential to sustainably serving people who rely on them. We continue to advocate for this with state partners alongside our own disciplined cost management and operational efficiencies. We are intensifying our work with states to address areas of potential fraud, waste and abuse for our commercial business. Membership levels, renewals and trends were generally in line with the expectations we shared with you.
The pricing actions we have previously discussed are materializing as intended, preserving margin while contributing to some moderation in growth. Self funded offerings continue to perform well. We are approaching the 2027 selling season with a focus on appropriate pricing for the elevated cost environment and meeting employer needs for more modern tools to support consumer engagement. Affordability as anticipated, the individual ACA business continues to contract. We still expect total membership to decline by approximately 1/3 in 2026.
Our approach in the ACA market continues to be directed toward the bronze and gold tiered products where member mix and utilization rates are largely aligned with plan. As a reminder, we pledge to refund any 2026 profits from these plans and our first quarter results reflect this pledge. In Medicare, medical trends remain elevated but in line with our pricing assumptions. This reflects continued service intensity and higher provider billing patterns consistent with what we saw exiting last year.
This is an issue that we are squarely addressing. Turning to enrollment Results from the annual enrollment period were largely as expected and OEP retention has remained stable at this point in the year. We expect membership to contract consistent with previous guidance, but centering more around a drop of 1.3 million on the final Medicare Advantage rate notice for the 2027 plan year. We appreciate that the Trump administration better aligned funding with increasing health care costs. It’s an important step to preserving stability for the millions of seniors who rely on material and toward ensuring this vital program’s long term sustainability.
Turning now to our efforts to improve the patient and clinician experience when they engage with us. Starting with prior authorization Prior authorization remains a critically important tool for eliminating fraud, waste and abuse and for helping ensure patient safety and quality care. We also recognize it is a source of frustration and we are working to reduce that. Nearly 95% of prior authorization requests are now submitted electronically. About 50% of those are processed in real time and more than 90% are approved on average in one business day.
We are working to enable more prior authorization submissions to be made directly within care provider workflows. In addition to the steps we are taking to further reduce the overall number of medical prior authorizations by 30% or more by the end of this year. Member adoption of UHC AI powered Digital tools continues to grow. Almost half of all members are now registered for and using UHC Digital Access. We saw 73 million digital visits in Q1, up 42% over the last two years, reflecting sustained and growing engagement with our digital platform.
Digital self service is now the primary way members interact with us, with over 80% of consumer contacts through digital formats and an NPS in the top quartile of the industry for care providers. Digital channels continue to grow with transaction volumes up 75% year over year and about 75% of in network providers using our portal or API tools. This improves real time access to eligibility, benefits and claim status while reducing manual outreach, enabling clinicians to spend more time on caring for patients.
We are intensifying our efforts to help independent rural healthcare providers. We will accelerate payments in all lines of business by 50% for rural hospitals and exempt rural health care providers from most medical prior authorization requirements. And we are building network partnerships between rural providers and leading regional health systems. Together, these initiatives will help lower cost and simplify processes for care providers and greatly enhance access to quality care for people in rural communities.
All these efforts and others like them are part of our commitment to pursue and invest in new and innovative ways to fulfill our mission to help people live healthier lives and help make the health system work better for everyone. With that, I’ll turn it over to Patrick.
Patrick Conway — Chief Executive Officer of Optum Rx
Thanks Tim. Across Optum, positive first quarter results reflect strengthened operations, continued investment in growth and changes that make engaging with us easier for patients and provider and clinician partners. I’ll start with Optum Health. Adjusted earnings of 1.3 billion reflect pricing and operational improvements that began in the back half of 2025 as well as actions taken to improve contracts and reshape our value based care portfolio to better align with the original purpose and risk profile for that strategy.
As we have shared over the past three quarters, our efforts are focused on management and process improvements that steadily improve margins at optum health for 2026 and accelerate into 2027. A key part of the progress is Optum Health’s return to a disciplined integrated value based care model. With increasing prices from health systems, rising patient acuity and higher consumer expectations, integrated value based care is the most effective way to improve outcomes and manage total cost of care over time.
We are privileged to serve over 20 million patients in our Optum health care models country, including over 4 million in fully value based arrangements. Both patients and care Providers do better when incentives are aligned toward care outcomes and not the quantity of services provided. For example, new research published in the American Journal of Managed Care showed that among nearly 2 million dual eligible patients, those in value based care arrangements had 24% fewer acute inpatient hospital admissions and 29% fewer emergency room visits than patients in traditional Medicare.
We are improving patient experience and outcomes through efforts to stabilize staffing, increase productivity, improve scheduling and standardize workflows in both our value based and fee for service models. It is this kind of operational focus that improves clinical outcomes by better focus and deployment of clinical resources to the right care time and setting and it gives us a clear path to long term sustainable margin levels of 6 to 8%. One example our west region where in response to rising patient acuity, we deployed more data driven clinically led navigation in areas such as hospital admission and discharge, skilled nursing facility transitions and emergency department encounters.
Since the last quarter, clinical reviews have increased by more than 50% with earlier patient intervention and more consistent care coordination. We’re already seeing inpatient and skilled nursing admissions trending sharply below historical levels, including an approximately 35% reduction in skilled nursing admissions in the first month compared to last year. These efforts are expanding to additional markets and reflect how using real time data, strong clinical leadership and coordinated care to improve outcomes can drive more predictable performance within our fee for service businesses.
We’ve brought more managed structure and accountability, starting with clearer scheduling guidelines, stronger regional leadership and better data and analytics to match supply and demand. These new standards are now in place across nearly 70% of our settings and are on track to reach nearly 80% by the end of the second quarter. They have already driven a 12% year over year increase in patients basing hours, which is better for both clinicians and patients. We are rapidly scaling self service digital scheduling including AI enabled tools that guide patients to the right appointment and the right setting at the right time for them.
That’s improving access, reducing friction and expanding capacity without adding incremental clinical burden. Moving to OptumRx, we started the year by onboarding more than 800 new clients while reducing contact call center volume 25% through enhanced digital and AI enabled self service with member satisfaction over 95%. Our unique pre check prior authorization capability reduces prescription approval time from over 8 hours to under 30 seconds and provides a 68% reduction in denials due to missing information and an 88% reduction in appeals, easing interactions for clients, members and providers.
First quarter utilization and drug cost trends were as expected, with scripts down slightly year over year reflecting some membership mix and attrition as manufacturers continue to implement significant drug price increases and with more complex specialty drugs representing over 50% of drug spending, the role of pharmacy care is more important than ever in helping patients access affordable drugs. At Optum Insight, new AI first products continue to gain traction. Optum Real is helping payers and care providers deal more efficiently with administrative functions such as claim adjudication and coverage validation, and can reduce manual contact costs by 76%.
Other AI initiatives help automate provider payer and internal workflows, improving accuracy, reducing administrative burden and strengthening our role as a technology partner for the health system. Within Optum Insight, Optum Financial Services continues to perform well and has agreed to acquire Allegis Technologies, a leading health financial services business. This is an important step in providing more flexible, consumer centered solutions for the people we serve. This transaction is expected to be accretive in 2027.
Our AI enhanced performance gives just a flavor of what Optum can do to help physicians and clinical care teams, payers and patients. Wayne, I’ll turn it over to you.
Wayne DeVeydt — Chief Financial Officer
Thank you Patrick and good morning. Our first quarter results reflect improving fundamentals and a strengthening of operations across our businesses. As Steve mentioned, all our operating segments exceeded our plan for the quarter, with particular strength in Medicare and Optum health. For the first quarter, we reported adjusted earnings per share of $7.23, well ahead of our expectations and backed by strong quality metrics including cash flows and reserves. We continue to balance near term performance with disciplined investment in longer term strategic priorities.
Total revenues in the quarter were 111.7 billion, reflecting 2% growth year over year driven by disciplined pricing actions and member mix. We now serve 49.1 million total members domestically compared to 49.8 million at the end of 2025. Turning to medical costs, a reported medical care ratio of 83.9% compares to 84.8% in the first quarter of 2025 and is a result of pricing discipline, strong medical cost management and favorable reserve development. The first quarter benefited modestly from seasonal dynamics including lower than expected respiratory activity.
Consistent with our guidance, we expect some of these dynamics to moderate as we move further into the second quarter, particularly given the impact of IRA related changes to Part D seasonality which meaningfully shifted the earnings profile beginning in 2025. Importantly, underlying utilization trends remained broadly consistent with our expectations and we are seeing early signs of improved alignment between pricing and medical cost trends. The operating cost ratio was 13.8% in the quarter, reflecting the timing of targeted investments across operations technology and care delivery as well as incremental investments in areas such as AI, customer experience, cybersecurity and community engagement.
We also recorded approximately $900 million in incentive compensation for the quarter as compared to 35 million in the first quarter of 2025. Reflecting our performance, we continue to expect operating cost ratio trends to normalize over the course of the year as these investments scale and begin to deliver productivity benefits. Our operating results were supported by solid operating cash flows of 8.9 billion in the quarter or 1.4x net income. Our capital priorities remain consistent invest in growth, strengthen our balance sheet and return value to shareholders.
With our cash flow performance this quarter we were able to bring the debt to capital ratio down to 42.9% on track to our year end goal of 40%. We initiated share repurchases earlier than anticipated and expect to deploy at least 2 billion by the end of the second quarter. Based on our current share price and the deep intrinsic value discount at which our shares are currently trading. Returning value through share repurchases will remain a priority and we anticipate further capital allocated into strategic acquisitions that support long term growth.
We will be measured in pursuing such assets while prudently managing our balance sheet. One other item of note for the quarter as previously discussed, as part of the restructuring actions taken in the fourth quarter of 2025, we will continue to remove from our 2026 adjusted results the residual impacts of those actions. The net negative impact of these Items was about $50 million for the quarter and was excluded from adjusted earnings per share. This impact includes, among other things, a $525 million gain on the sale of our UK business which was successfully closed in the first quarter.
We used 400 million of these net proceeds to provide additional funding to the UnitedHealth Foundation. Our intention is to improve the focus and discipline of our core operations while using proceeds from non recurring gains to further advance our mission by helping build healthier communities and a robust healthcare workforce. In addition, at Optum Health we had the positive impact of the lost contract offset by the final true up of losses related to assets which were held for sale as of December and divested during the first quarter.
While it is still early in the year, we’ve updated our full year outlook to greater than $18.25 per share. This refresh view balances the performance we saw in the first quarter with a prudent level of patience to see how the remaining months evolve. Our earnings cadence for the year remains consistent with prior expectations. We continue to expect approximately two thirds of earnings in the first half of the year and the remaining 1/3 in the second half. That said, the earnings profile varies meaningfully across the portfolio.
UnitedHealthcare earnings are over 75% weighted to the first half of the year. Similarly for Optum Health, we expect earnings to moderate throughout the year from Q1 levels, with a significant majority of full year reported earnings occurring in the first half. In contrast, Optum Insight and OptumRx are more naturally weighted to the back half, with each generating approximately 60% of earnings in the second half. This pattern also similarly influences the progression of our medical cost ratio, with first half levels more than 250 basis points below the midpoint of our full year guidance and second half levels more than 200 basis points above.
Overall, this has been a strong start to the year as we continue to improve our business performance and advance our mission. Steve, back to you.
Stephen Hemsley — Chairman and Chief Executive Officer
Thanks Wayne. Before we turn to your questions, let me kind of summarize where I think our company stands today. This was a solid quarter across all segments, positioning us for similarly solid progress going forward. The historic disciplines and innovations of UnitedHealthcare are rounding back into place. OptumHealth is clearly focusing on the right basic elements and gaining traction. Optum Insight has untapped potential in an AI centric world. They’re starting to sell business and building broader service relationships around that reality.
But to evolve more modern scale solutions and for users to be ready to embrace them will take more time in my mind. Later into 2026 and into 2027, our enterprise wide AI ambitions are meaningful and the agenda is in motion. We’re getting after business units and functions alike and importantly, critical processes that are core to several of our businesses. This is not just a matter of being more productive at what we already do, but a reimagining of how we organize, operate and work going forward.
Few if any large organizations have ever done things like this at this scale, so we match our desire for speed with prudence and humility. We remain focused on advancing business and management processes and continue making progress in areas such as governance, transparency, stakeholder experience and more. Underpinning these steps is the undertaking to deeply re energize our mission and culture across this company, an effort in which our leaders and people are engaged avidly. This management team believes we are a long way from performing to our full potential and we’re committed to getting to that potential quarter after quarter and reporting to you on our progress.
With that operator, please open the line for questions.
Questions and Answers:
Operator
The floor is now open for questions at this time. If you have a question or comment, please press star1 on your touchtone phone. You may remove yourself from the queue by pressing star2 on your touchtone phone. We ask you to limit yourself to one question. If you ask multiple questions, we will only be answering the first question so we can respond to everyone in the queue. This morning. Our first question comes from AJ Rice with ubs.
AJ Rice
Hi everybody. Thanks for the question. Just to maybe drill down on the comments around what you’re seeing in trend I know the last two years I think the general consensus is the Medicare Advantage cost trend was running about 7 to 8%. I know that coming into this year you guys described what you had been thinking about pricing for being closer to 10%. You’re saying it’s been consistent so far with what you’ve seen historically and your expectations. I’m wondering can we focus in on is it running close to 10% or is it more in the 7 to 8?
And if it’s accelerated where as an accelerate or if it’s moderated, where is it moderating?
Stephen Hemsley
Tim, you
Timothy Noel
Want to take that? Yeah. Good morning A.J. Thank you for the question. So you know, as we referenced Broadly speaking across UnitedHealthcare, trend is progressing in line with our expectation. And again our focus for 2026 was to focus on margin recovery and product stability across all of these businesses. And we continue to see the utilization patterns continuing at the high elevated levels that we experienced inside of 2025. And you’re correct, we were talking about a 7 to 8% trend in Medicare Advantage with a pricing of assumption of around 10% into 2026.
We’re seeing some modest favorability in the government programs which would then include Medicare Advantage commercial very consistent with those expectations. It’s really early right now we’ll have a more fulsome view and we talk in Q2 and can get down into some of the specific service categories. But right now the takeaway is modest favorability in government programs but progressing at those elevated high levels. We’re not seeing any inflection point and we’re really comfortable with the pricing posture that we had coming into 2026 based on how things are playing out in the early innings.
Stephen Hemsley
Thanks, Tim. Next question please.
Operator
Our next question comes from Kevin Fischbeck with Bank of America.
Kevin Fischbeck
Great. Maybe just following up on that trend question. You know, I think you specifically mentioned this in context to the Medicare Advantage, but you talked about acuity and provider billing and how you were trying to address that. So can you maybe size how much of the trend component is this acuity dynamic and then what exactly you can do to address it and how, how it may happen. And then just, just clarify, was that really just an MA comment or was that, was that a comment across trend across all products?
Thanks,
Timothy Noel
Kevin. I think I can, this is Tim. I think I can really address that across all products. When you think about, you know, trend drivers, our assumption is that the activity that we would see for 2026 would be pretty consistent with what we saw in 25. And as I just stated, that’s really playing out. What we’ve done is a couple of things. We talked in the Medicare Advantage space of our product positioning leaning more towards HMO based products as a means to be able to better manage outlier activity.
But broadly speaking, you know, themes that you can think about in terms of how we’re managing it is we have better tools to early identify some of the outlier patterns that we’re seeing and we’re some of the trend drivers inside of 2025 and engage early with clinical programs, with payment integrity programs and also in certain cases take network actions which we have done to be able to address those things. And we are making good progress in that area. And we’ll continue to focus on affordability across all the product lines inside of 2026 and probably be able to offer more information around that in the Q2 call as well.
Stephen Hemsley
Thanks, Tim. Next question please.
Operator
We’ll move next to Andrew Mock with Barclays.
Andrew Mok
Hi, good morning. Could you help us unpack what’s driving the outperformance in optum health this quarter? Specifically, how much is contract or benefit driven versus utilization driven? And can you clarify what’s driving the strong moderation in optum health profits such that the majority of earnings are recognized in the first half? Thanks.
Stephen Hemsley
Sure. Krista, please.
Krista Nelson
Thanks, Andrew, for the question. You know, we’re really encouraged by what we’re seeing in the first quarter, which is really a direct reflection of intentional actions that we’ve taken over the past few months to improve core performance. I’ll just call out two drivers of the performance improvement. First, we’re seeing medical from prior periods restate favorably relative to our expectations. But this is actually largely concentrated in markets where we’ve really focused on clinical and medical management efforts.
Patrick highlighted one of the examples in the west where we saw an opportunity to help support members in key moments of transition. And as we’ve increased and invested in leadership and process improvement and clinical reviews, we’ve actually seen a pretty sharp decline and improvement in unnecessary inpatient admissions as well as SNF admissions. And again, just really pleased with what we’re seeing. We expect this performance to continue and also are scaling some of those efforts across all of our markets.
The second driver I would point to is just we’ve seen continued improvement in operating performance, which includes cost management, which was a really big focus for us last year, but also just kind of fundamentals around operating execution. So the example we gave in our opening remarks, just around scheduling, that was a key focus for us to make sure we’re creating access points for all of our patients. And year over year after that focus, we’ve seen an improvement, 12% increase in patient facing hours that is happening actually across all of our regions where again we’ve just really focused on core operating improvement.
So I would say while it’s early, those two things are really giving us confidence that we’re focused in the right places and that we would expect some of this improved performance to continue rest of year. I think to your last question, just around the pacing. With the move of Optum Financial into Optum Insight, Optum Health really resembles a risk business in terms of seasonality. So that’s really why the majority, the significant majority really of the earnings will occur in the first half versus the second half.
Stephen Hemsley
Krista, thank you. So mostly utilization and the result of management. Great, thank you. Next question please.
Operator
Our next question comes from Justin Lake with Wolf Research.
Justin Lake
Thanks. Good morning. I wanted to stay on Optum Health for a minute. I appreciate all the details there. You know, I wanted to make sure the first of all the 1.3 billion of adjusted earnings does that, is that the right comparable to the guidance of 1.575 at the midpoint on an adjusted basis. And then Krista, you mentioned that you know, some of the benefit was from pyd. I’d like to understand what the, what the internal expectation was because that 1.3 billion is significantly higher than I think anybody expected.
I just want to understand what you were expecting internally and maybe how much of the difference versus internal was PYD versus run rate. And then lastly maybe you could share something similar on kind of how the business is running at up on insight Rx vs internal expectations because those looked a little lighter than Consensus was expecting. Thank you.
Stephen Hemsley
Okay, I think that’s three, Justin, if I’m counting. So maybe Wayne, you might take the first. Yeah. Chris to the second and then we’ll maybe come back to the third.
Wayne DeVeydt
Yeah. Justin, let me unpack this. I think I can address this fairly easily. As you think about Optum Health. Yes, you should be comparing the 1.3 billion of adjusted earnings to the guide of 1.575 that we provided originally for our true run rate. We believe that is a clean view of looking at the business and removes non cash accounting implications of the lost contract as well as the final disposition of assets in the quarter. The one thing I would say around Optum Insight and Rx, very similar to Optum Health, I think it’s very important to recognize in the prepared remarks that these are fully burdened by incentive compensation this year in Q1 and they were not fully burdened in Q1 of last year comparing 900 million and roughly 35 million.
So that really creates an unusual anomaly for our sell side investor analysts out there that are trying to model this and that was why we tried to call that out. I would say that all four segments did actually exceed our internal plan expectations. Krista, do you want to maybe address the prior year?
Krista Nelson
Yep. Yeah. So to your question, just on some of the prior period development, while some of this was favorable to our expectations, I just also want to reiterate, it’s really based on specific actions that we took in the fourth quarter. So the performance is coming in a little bit better but I’m not surprised by just how it’s coming in given some of the intentional work that we’ve done. I also mentioned that we are seeing some improvement in our, in our operating costs which is also contributing.
But also it’s early in the year and you know, we’re taking a really prudent approach to make sure that we see another quarter of medical mature and then frankly also just continue to focus on some of the basic blocking and tackling. There still remains a significant amount of opportunity for Optum Health to achieve its full potential. And so again we’re just focused on core performance and improving that consistently across our markets.
Stephen Hemsley
Thanks Krista. Next question please.
Operator
And we’ll move now to Steven Baxter with Wells Fargo.
Stephen Baxter
Yeah, hi, thanks. A couple questions about Medicare Advantage. I guess with visibility to the final rate, I would love to hear if you could discuss your confidence level and further margin recovery for 2027. And then just as an add on to that specific question, as we think about the moving parts, have you indicated that you’d participate in the balance program for GLP1s and if you indicating that you participate, you anticipate the industry thresholds for participation will be met. Thank you.
Stephen Hemsley
Bobby, you want to take that?
Bobby Hunter
Yeah. Thanks Steven for the question. So on the final notice, maybe just to start, I do want to express my appreciation for the active and ongoing engagement that we’ve had with cms. The changes made by CMS in the final notice were both important and impactful for the program and more importantly for the Medicare beneficiaries. However, also I need to acknowledge the reality that the widely expected medical trend for 2027 is still meaningfully above these funding levels. So consistent with our strategy in 2026, we’re going to remain focused on financial sustainability, product durability and then the path to margin recovery that we’re on within that 2 to 4% long term range that we’ve discussed for 2026.
Maybe just to hit that one as a jumping off point, we’re only a couple months into the year but feel good about achieving the 50 basis point year over year margin advance that we had previewed last quarter. And then for 2027 our aspiration is to be in the upper half of the 2 to 4% long term range and doing that while continuing to deliver the quality, the value and delivering on the full expectations that I know that our members have of us as it relates to your question about the Balance program.
So we’ve been in good active dialogue with both CMS and CMMI on that front. You know we’d like to find a path to yes there on coverage over time, but there are some notable challenges and outstanding questions with the currently planned structure. So we’re still working through that process internally and we look forward to continuing the dialogue with cms. We provided some specific recommendations that we believe would serve all stakeholders really well. As you know, we’ll be participating in the Bridge demo here starting in July and I think we’ll learn a lot about the best way to advance this priority through that experience.
Thanks for the question. Thank you. Next question please.
Operator
And our next question comes from Lisa Gill with JPMorgan.
Lisa Gill
Thanks very much. Good morning. Just want to understand a couple of things. The first would be the optim insight and OptumRx barely being back half weighted. It seems like that’s a little bit higher than it’s been historically. So is there anything to think about there? And then secondly, since we last spoke last quarter, the PBM legislation has passed and just want to understand are there any incremental investments that you need to make? I know you’ve been a lot more transparent than others, but is there anything to think about and if you do come to a settlement with the ftc, do we need to think about redomiciling the GPO to the US and is there any cost there.
Stephen Hemsley
Yeah, we’ll handle those separately. Wayne, do you want to talk about the.
Wayne DeVeydt
Yeah. The one thing I would say on the slope is for Optum insight, I would view this as what we’re doing is a couple of things. One is slowly decommissioning old products that were not AI based and reinvesting in those products through the investments. You’re getting the slow rundown of those products in Q1 and then the investments to transfer those over into more AI based. And I think you’ll see the benefits of that coming into the back half relative to op in the Marx. We are onboarding almost 800 new clients this year, of which the vast majority of those will be going into next year in terms of the actual run rate.
So you’re getting the full impact of those onboarding starting early in the year. But I think as the year progresses and we begin to migrate and bring folks over, you’ll start to see that subside. And I would also just remind you that we’ve assumed a little bit of lower script volume, obviously due to the membership that we had. But as the year progresses, I think you’ll see some of our GNA initiatives and AI investments coming through and that will actually improve the outlook in the back half.
Stephen Hemsley
Thanks, Wayne and Patrick and John, do you want to address pbm?
Unidentified Participant
Sure. Happy to. Thanks again for the question, Lisa. So if I look at PBM first, let me hit the. I’ll hit the punchline which is we’ve accounted for these impacts in our guidance both for the remainder of 2026 as well as, you know, our out year guidance as it relates to the gpo. Just hit that one head on. Our GPO is domiciled in the US So no impact, no impact. As we think about GPO broadly. I want to hit a couple of things. First, look at what’s happening in Tennessee and I will just say that we’re really concerned about that legislation as we see here today, primarily for what it means for access.
You know, what’s playing out in Tennessee is targeted at the retail pharmacy space. But the impact here goes well beyond the intended scope of retail specifically for us. You know, it will harm access for nearly 150,000 Tennesseans with complex conditions. Think cancer, think HIV, think serious mental illness that rely on specialty and behavioral health pharmacies designed to uniquely serve those populations. So very concerned. And we’ll continue to advocate for those that we serve in Tennessee and elsewhere beyond that with other emerging legislation.
I want to say that our work over the last two years has put us in the leadership position in the industry and you referenced that with the transparency comments. It goes even beyond transparency. There’s four drivers here, Lisa, maybe just to touch on. First is the independent pharmacy stability. As you know, again we don’t play in the retail space. We rely on a vibrant pharmacy network for more than 80% of the claims that flow through our PBM. And so we’re well ahead of the curve with 100% of our independent pharmacies reimbursed at a cost based reimbursement mechanism.
We’re leaning into health system pharmacies through our CPS business as well and expanding the reach for those pharmacies. The second driver is consumer affordability. On that front, Pricedge now serves 14 million members and between Price Edge Specialty Savings IQ and our critical Drug affordability, we’ll deliver more than a billion and a half dollars this year in affordability to the patients that we serve through this business. The third driver is the patient provider experience Patrick mentioned.
Pre check by prior auth on this one. We’re moving that from scale with the Cleveland Clinic to serve more than 20 health systems this year and continuing the work and the streamlining of prior authorizations for 180 drugs. And I’ll round out Lisa on payer transparency. This is what’s driving our growth. Wayne mentioned a record growth year. We’re experiencing another strong selling season and that’s largely driven by a compelling 15 part transparency guarantee for those that we serve. So feel good about our leadership position.
Have accounted for all this in our guidance. Thanks again for the question
Patrick Conway
Patrick.
Stephen Hemsley
Do
Unidentified Participant
You want to comment
Stephen Hemsley
Just
Patrick Conway
On overall Optum because it’s come in a couple ways. Look, all three segments as we said, exceeded expectations. If you look at Optum Health, core management of medical trend and operational execution. OptumRx has a lot of momentum in the marketplace, winning new clients and renewals but also ahead in the policy agenda and leading and then Optum Insight as Wayne and others mentioned, Sandip and team leading AI first products and services that we’re making those investments now those investments are starting to pay dividends and as Steve said in the opening, we’ll pay dividends in the long term.
Stephen Hemsley
Yeah. And ahead on PBM business practices because we’ve been at this for a couple of years so great question. Thank you. Next one please.
Operator
And we’ll go to Dave Windley with Jeffries.
David Windley
Hi, good morning. Thanks for taking my question. I wanted to come back to Optum Health or. Yes, Optum Health on the PDR and The lives associated with that, I believe are in a couple of tranches that add up to a million lives that you’re kind of in various stages of negotiation and scaling on. And I wondered if you could give us an update on the status of those. And are you at a point where you’re having conversations with new provider groups or new populations of members that you could add into your value based care base or are we still right, sizing down to the logical profitable base of lives that you can manage in vbc?
Thank you.
Stephen Hemsley
Okay, if I understand that basically there’s two pieces to that, the PDR and then kind of how we’re engaging in the market. So Wayne will touch on the PDR and Crystal will pick up the market.
Wayne DeVeydt
Yeah. Thanks, Dave. Good morning. Let me just quickly, on the pdr, we laid out what we estimated the PDR to be for the full year. It was north of $600 million. And that was a reflection of contracts that we fully anticipate either renegotiating to appropriate rates or we will de, delegate or exit. You’ll see the numbers actually slightly lower in Q1. That is a reflection of some of the assets that we disposed of in the quarter that had a PDR associated with them. But the team is still in active negotiations.
I’ll let Krista comment on that.
Krista Nelson
Yeah, Dave, thanks for the question. So we, I mean we are really in active negotiations and continue to partner with all of our payer partners just across our portfolio. And really pleased with the progress underway. We started significantly earlier. We’ve put a lot more data and infrastructure and support and leadership behind this. And frankly at this distance there’s still a number of levers we can work through with all of our payers, whether that’s product and benefit design for 2027, network opportunities, looking at the markets and the footprints that we’re in, as well as recalibrating appropriate rates.
And I think just like Wayne mentioned, I’ll reiterate our confidence in making sure that we get these items settled and get into a better position for 2027.
Stephen Hemsley
I think that kind of reflects a little bit of the cultural change in terms of the way we’re engaging and how we are working with relationships kind of across the board in a constructive way. So great response, Krista. And next question please.
Operator
And we’ll move to Ann Hines with Mizuho Securities.
Ann Hynes
Good morning. Thank you. I just want to focus on AI. I know it sounds like you’re doing a lot of investment. Can you share some maybe targets you have on how you think AI will from the cost side maybe like SG and a. Do you have a target internally how you think it could save? And then just also on a revenue side with Optum Insight, do you think your investment in AI could structurally shift the growth rate of that segment? Thanks.
Stephen Hemsley
Yeah, I think true on both fronts. So Sandeep, do you want to start?
Sandeep Dadlani
Sure. Thanks Ann for the question. As we said earlier, we’re spending about $1.5 billion in AI across UnitedHealth Group. Think about it this way. A third of this is explicitly invested into software products and platforms, accelerating Optum Insights transition of business models into an AI first software and services firm. The remaining 2/3 is spent across signature end to end processes and functions across UnitedHealth Group. Let me give you some examples. Areas like consumer member experience.
You must have noticed we just launched Avery, a generative AI chatbot answering member questions for United Healthcare which will be expanded to over 20 million members by the year end. Another example is an administrative simplification. Tim spoke about Trirop and the automation in UHC as well as Optum Health and OptumRx. A third area is clinical workflows, for example ambient rollout for physicians and nurses in Optum Health and then summarization capabilities for nurses and clinical reviews and then functions like hr finance, marketing, fundamentally reimagining these processes and areas.
In the end, all internal investments in AI use cases is routed through Optum Insight and has the potential to be commercialized outside of uhg. And we expect a return conservatively of, you know, two is to one on these programs over the next few years, many of them paying back within the next 12 to 18 months. Optum Insight AI first products are already seeing great external traction. Example this quarter we launched digital prior auth in keeping with the enterprise priority on prior auths. We already have a couple of payer clients and provider clients using them, another 50 clients in the pipeline.
And the early results are that Triroth submitted through our software have shown a 96% approval rate on first submissions. Optumreal, an AI first platform launched a couple of quarters ago, now has half a billion transactions year till date and expects to close the year at over two and a half billion transactions. And Optum AI, our new AI consulting arm, has already signed its first few contracts helping companies like LabCorp through their operational AI initiatives. So that should give you a good sense of AI inside and outside the company.
Thank you.
Stephen Hemsley
Thanks Sandeep. So I think really good potential. I think we’re going to be very measured as we go about this in terms of expectation, because I think it’s new for everybody. But definitely we are leaning into this. We think it can be quite impactful to our enterprise and to this whole industry. So good question. Thank you. Next please.
Operator
Our next question comes from Erin Wright with Morgan Stanley.
Erin Wright
Great, thanks. I wanted to follow up on the AI and automation front. And what should we though expect in terms of these savings accelerating in 20, 27, 28? I guess should we anticipate that, you know, the cost and contributions or how do we weigh the cost and then contributions of some of the efficiency gains there and how could this accelerate or even drive upside to the long term target margins across the different segments? And then just one quick follow up on capital deployment, just in terms of buybacks.
You announced the 2 billion today. I guess I just wanted to be clear what was embedded in guidance from a share repurchase standpoint. Thanks.
Stephen Hemsley
I’ll let Wayne handle the second one. The first one is, you know, very good question. This is kind of uncharted territory when you think about the scope that this could have. So we aren’t giving any guidance with respect to the compounding effect, if you will, of these kinds of changes across the business. But I will comment and reinforce something Sandeep said, and that is we’re really deploying it kind of across the enterprise, looking at our large core processes with an idea of modernizing those and then ultimately taking those to the outside marketplace and then the large overall functions typical of an organization of this size and scope.
And I think the potential is great, but I think it would be very premature to offer you kind of guidance in terms of what the impact of those could be. But I wouldn’t be making these investments if we didn’t think that these were not only strategically important to the, you know, maintaining the competitiveness of our organization, but also having long term positive impact, mostly for the consumer and the experience that others will have with us and then secondarily the very natural productivity list that it should produce.
Wayne, you want to take the other part?
Wayne DeVeydt
Yeah. Relative to capital deployment, our original guidance was approximately 2.5 billion back half loaded. So think of later Q3, Q4 at this stage with the intrinsic value discount. We see we thought it was important for shareholders that we would get at that sooner and the confidence we have in our results. So no changes in the guidance, but view it as we are moving quicker at this stage
Stephen Hemsley
And ultimately headed back to kind of where we were. So this is kind of restoring where we were in terms of this program that had been in place for almost 20 years. Next question please.
Operator
Our next question comes from George Hill from Deutsche Bank.
George Hill
Hey, good morning guys and thanks for taking the question. Wayne, a quick accounting question is could you quantify the PYD or the impact of the PYD in the quarter? And is there a way to break that out between the UHC impact and the impact? Thanks.
Wayne DeVeydt
Hey George, good morning. I think ultimately you’ll see when we file the Q PYD on a net basis is around a little bit north of $500 million for the organization. While that benefits the quarter, it’s important to recognize that we believe we’ve established somewhat of a similar level of conservatism or prudent view, I would say at March 31st until we can see more of this development in April and May from Q1. I think at this stage it would just be prudent to have a bit of patience right now. But that’s roughly the net number that came through from the prior year.
Stephen Hemsley
I do think that
George Hill
Appreciate that
Stephen Hemsley
Everybody needs to understand that this is the first quarter. Second quarter is usually quite informative in terms of the rest of the year. And so we’re I think appropriately positioning ourselves based upon what we see so far. We’ll take about two more questions please and then we’ll be available to answer questions through the balance of the day. So next question please.
Operator
Our next question comes from Michael hall with Baird.
Unidentified Participant
Hi, thank you. Quick clarification first, how much of the 400 million contribution to the UnitedHealth foundation is optim Insight? And then my real question just wanted. Yeah, sorry. And then my real question just wanted to ask about the proposed MA risk model recalibration. So I understand it’s now delayed, but when it is eventually implemented, possibly in 2028, a significant number of chronic condition code reimbursement is being cut and the magnitude of those cuts is what appears concerning to us.
The top 10 HCP code being chronic conditions making up the majority of RAS prevalence all across the industry and presumably higher for value based care providers. So with the reimbursement of some of those codes being cut down to 20%, this concerns us for optum health. So again, I know it’s delayed, but when it is eventually implemented, how do you expect the impact to Optum Health vs Industry average if you still believe the impact should be roughly in line with the industry average? And how do you justify that when your value based care business is purpose built to care for polychronic members and therefore disproportionately exposed to these material cuts to chronic conditions.
Thank you.
Stephen Hemsley
Well, I’m not sure that’s a question or a statement, but we’ll respond to that. Let’s take the first part.
Wayne DeVeydt
Yeah. Relative to the 400 million contribution to the foundation, we are trying to match those contributions relative to where the gains reside. So when we sold and closed our European operations operations, the gains were all within Optum insight north of 500 million and the entire foundation then came out of Optum Insight and that is included in the reconciliation to our adjusted segments that we provided in the press release.
Stephen Hemsley
That’s going to be a pattern we follow to the extent we get gains and things like that. We are invested in the notion of the foundation can be used as a means to really advance the healthcare system. Kind of be part of the responsibility we bear for that. We did that in the past and had kind of strayed from that in the last few years and just we’re returning to that theme with real commitment and Bobby, do you want to talk about. Start with the.
Bobby Hunter
Yeah, yeah, thanks Michael. I’ll start with kind of our view on modernization of the program and I’ll kick it to Krista then talk a little bit about the OptumHealth dynamic. So maybe just kind of big picture, you know, we’re again very appreciative of the active and ongoing engagement with CMS in the zones around modernization opportunity. I’m not going to speculate on what changes could happen to the program in future years. That said, we do believe there are opportunities to improve the program.
We support modernization. We for example, advocated for chart linking which was just finalized in the final rule and final notice. We are committed to making the system simpler, more efficient, more transparent and you know, Krista will get into it. But we see value based care as a critical and foundational tool to ensuring that success long term. In terms of risk adjustments specifically, you know, we actually wrote to our modernization agenda in response both the advance notice and proposed technical rule.
The big picture. We remain supportive of policy that advances and improves the program. But I think as you saw in this last rate cycle, it’s important that we all acknowledge that this work is complicated and it should be done thoughtfully with appropriate testing and staging and with program stability at the forefront. And in that regard we stand ready to partner in any and all respects. So maybe then Krista, if you want to add on the value based care optimum health piece.
Krista Nelson
Yeah, I would just start by echoing what Bobbi said. Just again, appreciative of the improvements that CMS made more Importantly, their commitment to the Medicare Advantage program and really foundational their commitment to value based care. The direction of their comments just continue to reinforce what our patients experience and what our payers experience, which is our value based care model delivers better outcomes, improved health status, better experience and a lower total cost of care for the patients that we serve.
And that alignment of incentives is really central to CMS’s goal which they have stated is for all of Medicare, not even just for Medicare Advantage. And so again, just reiterating our commitment to value based care has really never been stronger. Our focus is really on just improving our execution in our core operating performance and our model working closely with our payer partners to thoughtfully expand this to more patients and more providers over time. And at this distance it’s really too early to suggest what the impact could be for 2028.
But I would also just say inside of some of the proposed changes there were puts and takes for complex populations. And that’s really where our model has a significant benefit for patients as well as our payer partners. And again, we just remain focused on core fundamentals, improving outcomes for our patients and making sure that we can continue to scale value based care for more patients over time. Thanks.
Stephen Hemsley
And that should carry the day at the end of the day. So we have time for one more question and then we’ll be done.
Operator
Our last question comes from Sarah James with Kantor Fitzgerald.
Sarah James
Thank you. I want to try to unpack MLR outperformance under the lens of cost categories. Can you speak to trends across physician, hospital and drugs, how those are performing in the different books versus expectations, and then bridging that to your earlier comments on traction you’re seeing from engaging members in clinical programs and network actions. Can you clarify what cost category you’re seeing that move the needle on? Thank you.
Stephen Hemsley
Sure. Tim, do you want to comment on it?
Timothy Noel
Yeah, thanks Sarah for the questions. So again, a little early to get into that level of specificity on utilization patterns, but I think generally this modest outperformance that we’ve cited in government programs, you know, under the umbrella of uhc, which is largely aligned with our expectations, there’s no category I would spike out as being, you know, out of line compared to what our expectations were and the modest favorability that we’ve talked about around government programs is really kind of across the board based on the visibility that we have at this distance in Q1.
Thanks,
Patrick Conway
Patrick. Yeah, just on the optum side of Alice, OptumRx is purpose built to help payers and employers manage drug costs and we’ll save billions and billions of dollars. Again this year focused on affordable access to drugs as John described and been leading in the marketplace on Optum health, as Krista described. These are programs that decrease admissions for patients, keep them out of the hospital, get people into their homes where they want to be and care for them across the care continuum. And it’s really purpose built for some of the most complex patients that need this care the most.
And our payer partners, whether that’s UnitedHealthcare or others, as Bobby said, and we hear this from external payers as well, want that care for their members because it’s better quality, better experience and more affordable care.
Stephen Hemsley
Thanks, Patrick. So thank you all for the time today as we kind of build on the momentum as we get started in this year, we realize there’s a great deal more work to do and I think you’ll see sustainable progress to position this enterprise to serve all of its stakeholders in progressively better way. Quarter after quarter, that’s kind of our agenda. And so we’re going to return to that and we’ll see you next quarter. Thank you.
Operator
This does conclude today’s conference. Thank you for your participation.