UnitedHealth’s stock is plunging on higher medical costs. That may mean trouble for more insurers

UnitedHealth’s stock is plunging on higher medical costs. That may mean trouble for more insurers


The logo of UnitedHealth appears on the side of one of its office buildings in Santa Ana, California, on April 13, 2020.

Mike Blake | Reuters

UnitedHealth Group‘s stock sank 20% on Thursday after the company slashed its annual profit forecast, citing higher-than-expected medical costs in its privately run Medicare plans. 

Those bleak results from a healthcare giant seen as the insurance industry’s bellwether could be a warning sign for other companies with so-called Medicare Advantage plans, according to some Wall Street analysts. It comes after a turbulent 2024 for health insurers, hurt by lower government payments, soaring medical costs and public backlash after the murder of UnitedHealthcare’s top executive, Brian Thompson.

UnitedHealthcare, the insurance arm of UnitedHealth Group, is the nation’s largest provider of those plans. Shares of competitor Humana fell 5%, while Elevance Health dropped more than 1% and CVS tumbled 2%. Cigna has no Medicare Advantage business. Its stock was up almost 1% on Thursday.

UnitedHealth’s first-quarter results reveal “ominous signs” of accelerating medical costs in Medicare Advantage businesses, TD Cowen analyst Ryan Langston said in a note on Thursday. He added that the company “correctly foreshadowed” increasing medical costs back in 2023, so Thursday’s comments “will call into question” the full-year outlooks for every insurer. 

Higher medical costs have dogged the entire insurance industry over the last year as more seniors return to hospitals to undergo procedures they had delayed during the Covid pandemic, such a joint and hip replacements. But the issue had previously not been as significant at UnitedHealthcare.

Barclays analyst Andrew Mok said UnitedHealth’s problems may be less of an issue for companies that made “significant” exits from some Medicare Advantage markets, including Humana and CVS, according to a note on Thursday. Many insurers last year exited unprofitable Medicare Advantage markets due to higher medical costs and lower reimbursement rates from the federal government. 

Meanwhile, the issue could be a bigger deal for companies that gained greater market share in Medicare Advantage, such as Elevance Health and Alignment Health, according to Mok.

UnitedHealth said the rise in care use – or utilization – in its Medicare Advantage business came in far above what the company planned for the year, which was for care activity to increase at a rate consistent with what it saw in 2024. But trends that became apparent toward the end of the first quarter suggest that care activity increased “at twice” that level, UnitedHealth Group CEO Andrew Witty said during an earnings call on Thursday. 

The jump was particularly notable in doctor and outpatient services, which don’t involve overnight hospital stays, he added. 

“It’s very, very unusual,” Lance Wilkes, Bernstein senior equity analyst, told CNBC’s “Squawk Box” on Thursday. He said rising utilization is “really surprising” coming off the high level of care activity that the industry saw over the last year.

Wilkes added that UnitedHealth and the broader industry may be “pulling back” the “intensity of some of the activity they do to manage utilization,” which causes dissatisfaction among patients. For example, some insurers require prior authorization, which makes providers obtain approval from a patient’s insurance company before administering specific treatments.

“I think it’s probably United pulling back because of the policy headwinds and the scrutiny on the company,” Wilkes said. “I do think the horrible thing that happened to Brian Thompson and the company is a part of this, and I think it’s reflective of also the Department of Justice scrutiny on United over the last couple years.”

UnitedHealth is reportedly grappling with a government investigation of its Medicare billing practices.

Also on Thursday, UnitedHealth pointed to issues related to changes in the profile of patients treated under its Optum healthcare unit. That segment includes its pharmacy benefit manager, which negotiates drug rebates with manufacturers on behalf of insurers and maintains formularies, among others responsibilities. 

But Witty said the company is taking action to improve results and considers the issues related to Optum and elevated medical costs “highly addressable as we look ahead to 2026.” 

If nothing else, insurers are set to get a boost next year: The Trump administration in April said it would substantially increase reimbursement rates for Medicare Advantage insurers, hiking an earlier proposal from the Biden administration.  



Source

Speaker Mike Johnson says some Medicaid recipients will ‘choose’ whether to lose healthcare under House spending bill
Health

Speaker Mike Johnson says some Medicaid recipients will ‘choose’ whether to lose healthcare under House spending bill

Speaker Mike Johnson, R-La., on Sunday defended cuts to Medicaid in the budget bill House Republicans passed last month from allegations that millions of Americans could lose their access to the program, saying that “4.8 million people will not lose their Medicaid unless they choose to do so.” Johnson told NBC News’ “Meet the Press” that the […]

Read More
Healthy Returns: RFK Jr.’s Covid vaccine recommendation change could threaten health, access
Health

Healthy Returns: RFK Jr.’s Covid vaccine recommendation change could threaten health, access

A version of this article first appeared in CNBC’s Healthy Returns newsletter, which brings the latest health-care news straight to your inbox. Subscribe here to receive future editions. A wave of outrage is sweeping the scientific and medical world after Health and Human Services Secretary Robert F. Kennedy Jr.’s decision to stop recommending routine Covid-19 […]

Read More
CDC ends Covid vaccine recommendation for healthy kids and pregnant women
Health

CDC ends Covid vaccine recommendation for healthy kids and pregnant women

U.S. Health and Human Services (HHS) Secretary Robert F. Kennedy Jr. and Secretary of Education Linda McMahon attend a Make America Healthy Again (MAHA) Commission event, in the East Room of the White House in Washington, D.C., U.S., May 22, 2025. Evelyn Hockstein | Reuters The Centers for Disease Control and Prevention will no longer […]

Read More