UnitedHealth Group, a leading private insurer operating Medicare Advantage plans, experienced significant upheaval this week as CEO Andrew Witty unexpectedly stepped down on Tuesday. His exit occurs against a backdrop of increasing medical costs that have forced the company to withdraw its earnings guidance through 2025. These unwelcome surprises resulted in an equally shocking fall in the company’s share price. It dropped 8% in after-hours trading and went on to crater nearly 18% to a four-year low.
Witty’s resignation is an inflection point for UnitedHealth Group. The insurance giant sells those plans to almost half of the 65 million people on Medicare, mostly through its popular Advantage plans. The sudden leadership shakeup comes as the rapidly growing company faces mounting fiscal stress and questions about its future. Its recent suspension of its long-term financial forecast foreshadows a troubling future during a time of skyrocketing healthcare costs.
This turmoil is made worse by a civil fraud investigation into UnitedHealth’s Medicare practices that was revealed earlier this year in February. That’s why now, U.S. Senator Chuck Grassley (R-IA) is leading the charge. He released an investigation into the insurer’s billing practices related to their Medicare line of business. Grassley’s inquiry has forced UnitedHealth to disclose its nuts and bolts corporate compliance program. Regulators want to know how bad the problems might be, hence this document request.
These moves have deeply shaken investor confidence, but even more imposingly, they have left private insurers footloose and fancy-free to reshape the regulatory environment to their advantage. That investigation and scrutiny come as healthcare costs are under a microscope. Given UnitedHealth’s large stake in Medicare Advantage plans, the company finds itself at the center of this very debate.
As the company faces investigation, analysts begin to wonder what it will mean for UnitedHealth Group’s continued business practices and fiscal health. The continuing cloud of suspicion concerning its Medicare billing practices may lead to additional regulatory headaches. This is especially alarming because nearly half of all Medicare beneficiaries rely on the plans provided by this monopolist.