TLDR:
- UnitedHealth shares plunged 19% after missing Q1 earnings expectations
- Company slashed 2025 outlook from $29.50-$30.00 to $26.00-$26.50 per share
- Higher-than-expected Medicare Advantage care costs cited as main reason
- Trump administration’s 5.06% Medicare rate boost unable to offset current challenges
- Other health insurers also dropped on the news, with sector-wide impact
UnitedHealth Group reported disappointing first-quarter results on Thursday, triggering a steep 19% decline in its stock price. The health insurance giant missed Wall Street’s expectations and cut its full-year outlook, catching investors off guard.
The company posted adjusted earnings of $7.20 per share, below analysts’ forecasts of $7.29. Revenue came in at $109.6 billion, up $9.8 billion from last year but short of the $111.6 billion analysts had expected.
In a move that shocked investors, UnitedHealth slashed its 2025 earnings guidance. The company now expects adjusted earnings between $26.00 and $26.50 per share, down from its previous estimate of $29.50 to $30.00 per share issued in December 2024.
The stock closed at $472.50, dragging down the Dow Jones Industrial Average futures by 1%. The sharp decline also pulled down other health insurance stocks, with Elevance, CVS Health, Cigna, Centene, and Humana falling between 4% and 9% in premarket trading.
What’s Behind the Numbers
UnitedHealth blamed the disappointing results on “heightened care activity” in its Medicare Advantage business. Simply put, more seniors are using their insurance benefits than the company had planned for.
The insurer also pointed to the “greater-than-expected impact” of Medicare funding reductions that were put in place during the Biden administration. These cuts have been squeezing profit margins across the industry.
CEO Andrew Witty acknowledged the shortfall, stating that while the company had grown to serve more people, it “did not perform up to our expectations.” He added that UnitedHealth is “aggressively addressing those challenges.”
The healthcare industry has been dealing with increased costs since mid-2023. More seniors have been using medical services under Medicare plans, creating a surge in expenses for insurers.
Looking Ahead
UnitedHealth considers these Medicare-related headwinds to be “highly addressable” over the course of this year and into 2026. This suggests the company believes it can adjust its business model to adapt to the new cost reality.
The news comes just days after the Trump administration announced a 5.06% Medicare rate boost for next year. This increase is expected to generate more than $25 billion in additional revenue for the healthcare industry and is more than twice the 2.23% increase proposed under the Biden administration.
Despite this positive policy change, UnitedHealth’s current challenges proved too severe to maintain its original outlook. The rate increase may help in the future, but doesn’t solve the immediate cost pressures.
UnitedHealth’s insurance division, UnitedHealthcare, posted first-quarter revenue of $84.6 billion, up from $75.4 billion a year ago. Its Optum health services business saw revenue grow to $63.9 billion from $61.1 billion. While both divisions showed growth, the higher costs offset these gains.
Industry Impact
The forecast cut sent ripples through the entire health insurance sector. This suggests Wall Street fears that UnitedHealth’s challenges may be industry-wide rather than company-specific.
Before this earnings miss, UnitedHealth had been outperforming both its peers and the broader market. Its stock had gained 15% this year, compared to losses of 11% for the S&P 500 and 7% for the Dow Jones Industrial Average.
Health insurers had been viewed as “tariff-proof” investments because they operate mainly within the U.S. healthcare system. This made them attractive during uncertain trade conditions.
Now, investors must weigh whether this earnings miss represents a temporary setback or the beginning of a more persistent problem for UnitedHealth and the health insurance industry.
The company will need to demonstrate in upcoming quarters that it can successfully address the higher utilization rates in its Medicare Advantage business. Until then, investors may remain cautious about the stock’s prospects.
UnitedHealth’s next moves will be closely watched by Wall Street as an indicator of how well the entire healthcare sector can manage rising medical costs in an aging population.
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