A surprising Medicare Advantage cost spike helped push UnitedHealth into a rare deep dive Thursday, after the health care giant chopped its 2025 forecast following a worse-than-expected first quarter.
The company's stock price sank by about $130 in its worst one-day performance in over 25 years. Its first-quarter report also rattled other health insurers.
UnitedHealth leaders said care use from people enrolled in its Medicare Advantage plans wound up increasing at twice the rate they had planned for the quarter.
That contributed to an overall performance that was “frankly unusual and unacceptable,” CEO Andrew Witty told analysts during a conference call. But he emphasized that this was a temporary, fixable issue.
The unexpected use spike did not extend to the company's other lines of coverage, which include commercial insurance and state-and federally funded Medicaid plans.
UnitedHealth Group Inc. operates the nation’s largest health insurer, UnitedHealthcare, which covers more than 50 million people. It also has a large pharmacy benefit manager that runs prescription drug coverage and a growing Optum segment that delivers care and provides technical support.
With more than 8 million customers, UnitedHealthcare is the nation’s largest provider of Medicare Advantage plans. Those are privately run versions of the federal government coverage program mostly for people ages 65 and older.
Insurers have struggled to maintain Medicare Advantage profit margins as funding cuts in former President Joe Biden’s administration combined with rising care use and costs, said Daniel Barasa, a portfolio manager at Gabelli Funds.
But he noted that a recently announced 2026 rate increase for Medicare Advantage should help starting next year.
Overall, UnitedHealth posted a $6.3 billion profit in the quarter. That compares to a $1.41 billion loss last year, when the company absorbed heavy costs from a cyberattack on its Change Healthcare business.
Adjusted earnings totaled $7.20 per share on $109.58 billion in revenue in this year's first quarter.
Analysts expect earnings of $7.29 per share on $111.53 billion in sales, according to the data firm FactSet.
For 2025, UnitedHealth now predicts adjusted earnings ranging from $26 to $26.50 per share. The Eden Prairie, Minnesota, company initially forecasted earnings of $29.50 to $30 in December. It then reaffirmed that outlook in January.
Analysts forecast earnings of $29.72 per share.
Company shares fell 22% to $454.15 on Thursday. That weighed on the Dow Jones Industrial Average, of which UnitedHealth is a component.
The stock decline amounted to UnitedHealth's biggest one-day percentage drop since Sept. 30, 1999, according to FactSet. The share price had reached an all-time high of more than $630 last November.
UnitedHealth is the first insurer to report results every quarter. Many see it as a sector bellwether. Shares of other insurers also fell Thursday, but none dropped as steeply as UnitedHealth.
Competitor Elevance Health Inc. said on Thursday that it doesn't expect surprises when it reports first quarter results later this month.
The Blue Cross-Blue Shield insurer covers more than 2 million people in Medicare Advantage. It previewed first-quarter earnings that will come in better than Wall Street forecasts.
“While cost trends in Medicare Advantage remain elevated, the (company’s) first quarter experience was consistent with its expectations and pricing,” Indianapolis-based Elevance said in a Securities and Exchange Commission filing.
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