On Thursday, a significant and unforeseen spike in Medicare Advantage costs cast a shadow over UnitedHealth, causing its stock to take an unprecedented plunge. The health care giant had to revise its 2025 financial forecast following a challenging first quarter that did not meet expectations.
UnitedHealth’s stock value tumbled by approximately $130, marking its most severe single-day decline in over two and a half decades. The first-quarter earnings report left a ripple effect, shaking up other health insurance stocks as well. Company executives revealed that care usage among Medicare Advantage plan members increased at a rate twice what was anticipated for the quarter.
CEO Andrew Witty noted during a conference call that this surge led to an overall performance that was “frankly unusual and unacceptable.” However, he remained optimistic, assuring analysts that this issue was temporary and remediable. The unexpected surge in usage did not affect UnitedHealth’s other insurance offerings, which include both commercial plans and government-backed Medicaid programs.
UnitedHealth Group Inc. runs the country’s largest health insurance provider, UnitedHealthcare, responsible for covering over 50 million individuals. Additionally, the company boasts an extensive pharmacy benefit management operation as well as its burgeoning Optum segment, which provides care services and technical support.
UnitedHealthcare also stands as the leading Medicare Advantage provider in the U.S., catering to over 8 million clients. These plans are private alternatives to the federal government’s insurance program for those primarily 65 and older. Insurers have been challenged to keep Medicare Advantage profit margins healthy, given the combination of reduced funding under the Biden administration and rising healthcare costs and usage, according to Daniel Barasa, a portfolio manager at Gabelli Funds. However, he mentioned that the newly announced rate increase for 2026 Medicare Advantage plans should start to offer relief next year.
For the quarter, UnitedHealth reported a profit of $6.3 billion, a recovery from last year’s $1.41 billion loss caused by extensive costs from a cyberattack against its Change Healthcare unit. The adjusted earnings for the first quarter this year were $7.20 per share, based on $109.58 billion in revenue. Analysts, however, had projected earnings of $7.29 per share on $111.53 billion in sales, as noted by the data firm FactSet.
Looking to 2025, UnitedHealth now projects adjusted earnings between $26 and $26.50 per share. Initially, the company had forecasted $29.50 to $30 in December and had reiterated these expectations in January. Analysts had predicted earnings of $29.72 per share.
On Thursday, UnitedHealth’s shares dropped 22% to close at $454.15. This fall in share price exerted downward pressure on the Dow Jones Industrial Average, as UnitedHealth is a component of this index. The dramatic decrease marked UnitedHealth’s largest single-day percentage loss since September 30, 1999, based on FactSet data. Previously, the stock had hit a record high of over $630 last November.
As the first insurer to present its quarterly results, UnitedHealth sets a benchmark for the industry. Shares in other insurance companies also dipped on Thursday, though none as sharply as UnitedHealth’s. Meanwhile, rival Elevance Health Inc. expressed confidence by stating it doesn’t foresee any surprises when it reports its own first-quarter results later this month.
Elevance Health, a Blue Cross-Blue Shield insurer serving more than 2 million Medicare Advantage members, indicated that its first-quarter performance exceeded Wall Street predictions. “While cost trends in Medicare Advantage remain elevated, the (company’s) first quarter experience was consistent with its expectations and pricing,” the Indianapolis-based company declared in a Securities and Exchange Commission filing.