UnitedHealth Stock Jumps. It Cleared a Low—but Important—Hurdle.

Shares of UnitedHealth Group are down 47% over the past year. (Dreamstime)

UnitedHealth Group , the troubled managed care giant, issued a securities filing early Tuesday saying that its business is performing about as well as expected. The company hasn’t made a practice of meeting expectations in recent years, and the disclosure was enough to set off a buying spree.

Shares were up 2.6% Tuesday morning, after climbing as much as 4.2% shortly after the market opened, amid reassuring signs that the new management team may be getting things back on track.

UnitedHealth owns the insurer UnitedHealthcare, plus a long list of other businesses that include physician practices, billing software, and a pharmacy benefit manager.

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The stock is down more than 45% this year, and fell 22% on a single day in April on a significant guidance cut. This year’s troubles come after a series of disappointments related to its Medicare Advantage business, which manages healthcare for U.S. seniors using funds from the federal government.

Now, the company is in the midst of a reset. It has ousted CEO Andrew Witty and brought back Stephen Hemsley, who pursued aggressive expansion during his first tenure leading the company from 2006 to 2017.

In its filing on Tuesday, UnitedHealth said that it was reaffirming the earnings expectations that Witty had set in July.

More significantly, the company also said that preliminary data for the 2027 quality rating year from the Centers for Medicare and Medicaid Services, which manages the Medicare Advantage program, says that 78% of UnitedHealth’s Medicare Advantage members will be in plans with quality ratings of four stars or higher, on a five-star scale.

Those quality ratings matter to investors and the company. CMS pays large cash bonuses to companies with highly rated plans, and cash bonuses play a major role in the profitability of the Medicare Advantage businesses of plan sponsors. The healthcare policy group KFF reported in July that CMS will pay out at least $12.7 billion in quality bonuses to Medicare Advantage plan sponsors in 2025.

For UnitedHealth, 78% of its members being on four-star plans is reasonably good news. The company has had a long-term goal of having 80% of its members in plans rated four stars and above, and on Tuesday said in its filing that 78% “is consistent with our expectations and in line with historical performance.”

CMS generally discloses its Medicare Advantage quality ratings for the following year in early October, but gives companies a peek weeks earlier.

In a note on Tuesday, TD Cowen analyst Ryan Langston wrote that he had estimated around 84% of UnitedHealth’s membership was in four-star plans or better in 2025, and said that the implied drop next year “would result in a manageable headwind.”

Investors seemed thrilled despite the apparent drop. The report should alleviate what had been a growing set of investor anxieties around the quality ratings. In a note on Aug. 17, Bank of America analyst Kevin Fischbeck had written that if there was a meaningful drop in quality ratings for the 2027 payment year, then “the return to normalized margins would be pushed to 2028 at the earliest, likely leaving the stock in limbo for another year.”

Fischbeck wrote at the time that he normally wouldn’t be worried about UnitedHealth maintaining its ratings, but that the depth of the company’s problems makes it hard to rely on most normal assumptions. “The widespread nature of the issues facing UNH shows that UNH hasn’t been managed well for years, leaving the door open for a negative surprise,” he wrote.

That negative surprise now won’t come. Still, the company has a long way to go to right the ship. Despite newfound interest from prominent investors, notably Berkshire Hathaway’s Warren Buffett, UnitedHealth’s recovery is far from certain. But Tuesday’s news took at least one big worry off the table.

Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com