UnitedHealthcare, the biggest single provider of Medicare Advantage plans in the United States, is in big trouble. Its shares have tumbled 20% since the company shocked investors by slashing its annual profit outlook by more than half. This downturn is a result of much higher-than-expected medical costs for its privatized Medicare plans. Their care utilization has increased at two times the expected rate. That was a troubling dynamic for UnitedHealth and may spell trouble for other insurers that are struggling with the same fate.
The company released its quarterly results for Q1. They reported “troubling harbingers” of a needless, year-over-year surge in expenses for their private Medicare Advantage business. UnitedHealth’s projections for care usage were way off by orders of magnitude. This has prompted concerns that higher costs will drive even more insurers to exit unprofitable markets. Most have already receded from these spaces. This dramatic change is largely being fueled by the skyrocketing operational costs, combined with dwindling reimbursement rates from government payers.
In 2023, UnitedHealth Group had already suggested an impending increase in medical costs, which has now come to fruition. As our CEO, Andrew Witty, recently noted, care activity increased at twice the rate of 2024. This large added increase makes the company’s long-term financial picture even more dire. That sudden surge in care usage has sent up alarms for investors and analysts across the board.
Siemens UnitedHealth is deeply embroiled right now in intense scrutiny over its Medicare billing practices, which has only added to these pressures on its bottom line. Lance Wilkes, an industry analyst, commented on the situation, stating, “I think it’s probably United pulling back because of the policy headwinds and the scrutiny on the company.”
The issues affecting UnitedHealth are not isolated. Other insurers have similarly struggled due to rising medical costs and have made the difficult decision to withdraw from Medicare Advantage markets. This local trend speaks to a larger national conversation across the healthcare ecosystem about sustainability and making money in this part of the industry.
Even with the operating hurdles, UnitedHealth continues to remain optimistic. They’ve got the corporate will to bulldoze through their massive Optum healthcare division regulatory troubles and high medical costs. The firm calls these problems “highly addressable” as it sets its sights 2026 and beyond. Changing patient profiles served through Optum have increased costs. Today, chief executives are getting serious about building better strategies to deliver better results.
In a troubling new move, the Trump administration is proposing to increase reimbursement rates for Medicare Advantage insurers by record amounts in 2025. Consider the effect this decision could have on the wider industry. This decision marks a clear departure from the administration’s previous proposals. It would provide meaningful relief to businesses that are really struggling to stay afloat.
As you can see, UnitedHealth is sailing through a stormy seas. Meanwhile, analysts are looking carefully to see how it addresses its internal operational challenges and how it addresses external regulatory scrutiny. Wilkes pointed out the personal toll this situation may take on company leadership, remarking, “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 the Department of Justice scrutiny on United over the last couple of years.”