The largest health insurer in the United States is down 20% in pre-market trading on Wall Street. The blame lies with the quarterly results and lower targets.
Recently, we reported on the recovery of US health insurance groups —Cigna, Humana, CVS Health, and, of course, the main player, UnitedHealth. We mentioned that after the significant difficulties of recent months, the sector has been relieved by the increase in the reimbursement rate granted by the federal government for Medicare – the insurance program for people over 65 – for next year. In addition, the murder of Brian Thompson, CEO of UnitedHealthCare, on a New York street last December sparked a lot of tension in American society over the lucrative nature of health insurance. These tensions have calmed down in recent weeks. Finally, the sector had been hit by poor results from certain players, notably Cigna and Humana.
However, all this seemed to be a thing of the past until today. UnitedHealth’s 35% rebound over the past two months seemed to prove this. But ultimately, this was not the case. UnitedHealth has just released figures that fell short of expectations. Over the first three months of the year, revenues rose by 9.8% to $109.6bn, but analysts expected an additional $2bn.
However, it is mainly the group’s annual projections that are being punished. Initially forecast in a range of $29.5 to $30, UnitedHealth is now targeting EPS of between $26 and $26.5. This represents around a 13% reduction in targets. There will therefore be no profit growth this year.
What’s behind this? Three factors.
First, the group has seen an increase in Medicare Advantage program care, especially since the end of the quarter. This increase is much higher than anticipated, which was in line with the already high levels of 2024.
Second, and somewhat contradictorily, the group is facing unexpected changes in the profile of Optum members—the healthcare services, pharmacy benefits management, and medical technology division—as fewer people than expected have used certain health plans in 2024. As a result, this has a negative impact on the federal government reimbursements the company expects for this year.
Finally, continued reductions in federal Medicare funding have had a greater than expected impact on complex patients. This is the same reimbursement rate that we mentioned earlier in this paper would increase in 2026.
