Dow Jones: Blue Chips Hit as UnitedHealth Warning Triggers Sector-Wide Sell-Off

UnitedHealth Slashes Profit Forecast on Persistent Medicare-Related Costs

UnitedHealth Group cut its 2025 earnings outlook on Thursday, citing ongoing cost pressures tied to its Medicare Advantage business. The news weighed heavily on the healthcare sector, sending UnitedHealth shares down nearly 20% in premarket trading and dragging peer insurers Elevance, CVS Health, and Humana lower by 2%–3%.

At 10:34 GMT, UnitedHealth Group shares are trading $474.07, down 100.97 or -18.97%.

Medicare Advantage Expenses Drive Forecast Revision

The company now expects 2025 adjusted earnings between $26 and $26.50 per share, a sharp downgrade from its prior range of $29.50 to $30. Analysts surveyed by LSEG had anticipated $29.73 per share. The downgrade reflects unexpectedly high care utilization levels, particularly within physician and outpatient services for seniors enrolled in Medicare Advantage.

UnitedHealth reported these costs remained consistent with elevated 2024 levels and exceeded its expectations for 2025. Additionally, changes in Optum Health’s member profile—due to minimal beneficiary engagement in markets being exited—affected projected reimbursement rates, compounding the cost pressure.

First Quarter Results Highlight Operational Strain

Despite revenue growth, profit margins showed strain. UnitedHealth posted Q1 2025 revenue of $109.6 billion, up from $99.8 billion a year earlier. Earnings from operations were $9.1 billion, with a net margin of 5.7%. The medical care ratio rose to 84.8%, up from 84.3% in Q1 2024, driven by Medicare funding reductions and a higher mix of senior care services.

Days claims payable dropped to 45.5, reflecting changes in Medicare Part D timing, while the operating cost ratio improved to 12.4% from 14.1%, due to tech efficiencies and lower administrative costs. Cash flow from operations reached $5.5 billion, and the company returned $5 billion to shareholders via buybacks and dividends.

Segment Growth Shows Mixed Trends

UnitedHealthcare revenues reached $84.6 billion, up $9.3 billion year-over-year, but were impacted by elevated senior care activity. Commercial self-funded membership increased by 700,000, though the individual exchange segment saw attrition due to pricing pressure. The company grew its Medicaid-related membership to 7.6 million and expanded coverage in Kentucky, New York, and Florida.

Market Forecast: Bearish Near-Term Outlook for Health Insurers

UnitedHealth’s outlook downgrade signals broader cost challenges in the health insurance sector, especially in government-backed plans. Persistent care demand and reimbursement issues suggest continued margin pressure. Traders should adopt a cautious stance on health insurers in the near term, with a bearish bias until cost normalization becomes visible.

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