In this photo, UnitedHealthcare health insurance company signage is displayed on an office building … More
The recent announcement of UnitedHealth Group lowering its profit forecasts for 2025 has sent shockwaves through Wall Street and investors. Despite this, the company still managed to generate over $6 billion in profits and is experiencing rapid growth.
UnitedHealth Group CEO Andrew Witty addressed analysts and investors on Thursday morning following the release of the company’s first-quarter earnings report, which revealed a significant decrease in forecasted earnings per share.
The company revised its “2025 performance outlook established in December 2024 to net earnings of $24.65 to $25.15 per share and adjusted earnings of $26 to $26.50 per share.” This is a notable change from the previous forecast in January, which projected net earnings of “$28.15 to $28.65 per share.”
The stock was pummeled, a rare occurrence for a company like UnitedHealth, which owns the largest health insurer in the nation, UnitedHealthcare, as well as Optum, one of the leading healthcare services companies. Optum encompasses various physician practices, outpatient care clinics, and OptumRx, one of the largest pharmacy benefit managers in the country.
UnitedHealth’s stock experienced a more than 20% decline in early afternoon trading on the New York Stock Exchange, coinciding with a general downturn in the market as Donald Trump criticized Federal Reserve Chairman Jerome H. Powell.
In the first quarter, the company reported a net income of $6.3 billion, a stark contrast to the $1.4 billion loss in the first quarter of 2024. Revenues also saw a significant increase, reaching $109.6 billion in the first quarter.
However, UnitedHealth is facing escalating costs in its Medicare Advantage plans, particularly due to higher-than-expected utilization by seniors seeking healthcare services.
“In UnitedHealthcare’s Medicare Advantage business, we anticipated a care activity increase in 2025 consistent with the trend observed in 2024,” Witty explained to analysts. “However, the first quarter of 2025 indicated a double rate of care activity growth. Notably, there were significant increases in physician and outpatient services, with a lesser impact on inpatient services.”
The company’s medical care ratio (MCR), which represents the percentage of premium revenue allocated to medical costs, stood at 84.8%, compared to 84.3% in 2024.
During the Covid-19 pandemic, insurers, including UnitedHealth, benefited from lower MCRs as patients deferred healthcare visits. UnitedHealth Group noted that the full-year 2020 MCR of 79.1% decreased from 82.5% in 2019, attributing the decline to disrupted care patterns at the start of the pandemic.
Additionally, there are indications of reduced government spending on Medicare Advantage, with speculation that the Trump administration may further cut Medicare funding to accommodate tax cuts.
To counteract these challenges, Witty outlined the following strategies:
- “We are focusing on engaging complex patients affected by previous Medicare funding cuts in clinical and value-based programs.”
- “We are increasing engagement with members in home and post-discharge settings, emphasizing the importance of continued engagement.”
- “We are prioritizing the assessment and updating of health status for new patients, especially those at high risk levels.”
- “We are making significant investments in improving physicians’ clinical workflows to facilitate better care and timely insights into efficient and effective care delivery, particularly in transitioning to the new CMS risk model.”
- “Our Medicare Advantage plan designs and pricing for 2026 will be informed by these trends.”
Amidst these challenges, UnitedHealth is expanding its customer base across various sectors, including UnitedHealthcare’s Medicare Advantage and Medicaid plans for low-income individuals, as well as healthcare providers under the Optum umbrella.
“UnitedHealthcare’s Medicare Advantage business is expected to serve an additional 800,000 individuals this year,” Witty stated regarding a business that already boasts over 8.2 million enrollees. “Optum Health is on track to add 650,000 new patients to value-based care arrangements. In Medicaid, we are witnessing growth and positive momentum in bridging the gap between individuals’ health status and state rates, with productive discussions ongoing with state customers.”
