“United runs a very tight ship,” said Brad Ellis, senior director at Fitch Ratings. “They report first, and it's always a bellwether, so it doesn't really impend positive outcomes for the other players.”
Wall Street reacted accordingly, and every publicly traded health insurance company got hit when the markets opened Thursday. UnitedHealth Group suffered its greatest drop in a quarter-century as its share price fell 22.4% to $454.11 by the time trading ended.
Humana, Aetna parent company CVS Health, Elevance Health, Molina Healthcare, Centene, Alignment Healthcare and Oscar Health also closed the day down, but their stocks rebounded from deeper losses earlier in the day. Cigna, which exited the Medicare Advantage market by selling its assets to Health Care Service Corp. last month, saw its shares close up 0.2% to $330.13.
That market activity may reflect differing views among financial analysts on whether UnitedHealth Group being caught off-guard about Medicare Advantage costs that have been persistently high for two years is a UnitedHealth Group problem or a Medicare Advantage problem.
Elevated Medicare Advantage spending isn't unique to UnitedHealthcare but its missed guidance may be an outlier event. Elevance Health attempted to ease investors' nerves after UnitedHealth Group’s report by announcing Thursday it will beat its earnings guidance for the first quarter even amid high Medicare Advantage costs.
“If Elevance's view of the world is correct, perhaps this is just the 'winner's curse' being amplified at UnitedHealth because of its additional risk-related business in Optum Health,” Julie Utterback, senior equity analyst for Morningstar, wrote in an email.
Rival carriers are due to report their first-quarter results in the coming weeks and Wall Street is watching closely for signs that insurers such as Aetna and Humana are on the right track. “We're not out of the woods until we see CVS and Humana numbers,” said John Ransom, managing director at Raymond James.
UnitedHealthcare Medicare Advantage utilization grew twice as fast in the first quarter as it did in 2024, and company executives expect that trend to continue into next year. UnitedHealth Group CEO Andrew Witty described these results as “unusual and unacceptable” during a call with investor analysts Thursday.
The company cited elevated costs among new Optum Health patients, Optum Health CEO Dr. Amar Desai said during the call. “Our patient profile post-[annual enrollment period] included many new to Medicare, as well as new to Optum Health, who were meaningfully less engaged by their prior health plans and providers,” Desai said.
Through Optum, UnitedHealth Group is the largest employer of physicians in the U.S. That made the subsidiary vulnerable to actions other Medicare Advantage carriers took, such as fleeing unprofitable geographic areas.
“No one has the same level of exposure to the physician risk-sharing business,” said Whit Mayo, senior managing director at Leerink Partners. “What we're seeing is the consequence of what happens when you have a historic level of insurers exiting markets,” he said.
UnitedHealth Group also called out unique cost issues afflicting its group Medicare Advantage business. “We're seeing a significant and disproportionate increase in utilization, largely within our public sector group retiree business,” UnitedHealthcare CEO Tim Noel said on the call. “We've really never seen this dynamic before in the group MA business.”
Medicare Advantage payment cuts in 2024 and 2025 spurred UnitedHealth Group to raise premiums this year, and some UnitedHealthcare group Medicare Advantage premiums rose from $50 to $200, Noel said. The company believes this price hike motivated members to use their insurance, he said.
UnitedHealth Group operates the largest group Medicare Advantage business with 32% market share, followed by Aetna with 23%, Humana with 10% and Elevance Health with 6.3%, according to an analysis of Centers for Medicare and Medicaid Services data by the investment bank Stephens.
Despite the earnings miss, UnitedHealth Group is still in a favorable financial position, Utterback wrote in a research note Thursday. “UnitedHealth remains the strongest managed care organization we cover with significant margin for executional error like we are currently seeing,” she wrote.
UnitedHealth Group reported net earnings of $6.5 billion, compared with a net loss of $1.2 billion a year before, and revenue rose 9.8% to $109.6 billion. The company counted 50.1 million members, up 1.9% from a year ago.
