TipRanks
5 min read
In This Article:
UnitedHealth Group’s stock (UNH) has hit a rough patch, weighed down by regulatory pressure on its Medicare Advantage programs and rising medical costs. But stepping back from the current turbulence, there’s reason for cautious optimism. UnitedHealth’s strategic direction and diversified business model leave it well-positioned to benefit from long-term healthcare trends, even as it navigates short-term headwinds. All things considered, I remain cautiously bullish on UNH.
-
Easily unpack a company's performance with TipRanks' new KPI Data for smart investment decisions
-
Receive undervalued, market resilient stocks right to your inbox with TipRanks' Smart Value Newsletter
UnitedHealth is facing challenges on multiple fronts. Most notably, the Department of Justice (DOJ) is investigating potential fraud in its largest revenue source, the Medicare Advantage (MA) business. This follows a civil inquiry into whether the company exaggerated patient diagnoses to secure higher payments for its MA plans, a serious allegation. UnitedHealth has denied any knowledge of a criminal investigation, so for now, that aspect remains speculative.
These concerns come as the Centers for Medicare & Medicaid Services (CMS) plans to audit all Medicare Advantage programs, placing additional scrutiny on UnitedHealth. Given that the MA business is a critical part of UnitedHealthcare—one of the company’s two core segments alongside Optum—this spotlight could have meaningful implications.
In its first quarter 2025 earnings, UnitedHealthcare’s revenues were $84.6 billion out of total revenues of $109.6 billion. As of Q1 2025, UnitedHealthcare had 8.2 million MA members, making up nearly 20% of the total domestic membership.
In addition to mounting regulatory pressure, UnitedHealth’s Medicare Advantage (MA) business is being squeezed by rising medical costs. An aging population is driving higher-than-expected utilization of healthcare services, while government reimbursement rates are slow to keep pace. For example, the planned 5.06% increase in reimbursement for 2026, though helpful, is unlikely to fully offset the surge in expenses, leaving MA providers like UnitedHealth in a difficult position. These cost pressures have already forced the company to lower its full-year 2025 earnings guidance.
Compounding the situation are the lingering effects of the February 2024 ransomware attack on its Change Healthcare subsidiary, which exposed sensitive data of millions of patients. On top of that, the company is still reeling from the tragic assassination of former CEO Brian Thompson last December, adding further disruption during an already turbulent period.
