UnitedHealth Group stock closes down 22%, erasing nearly $120B in market value

UnitedHealth Group’s stock dropped 22% on Thursday, erasing more than $120 billion in value, after the company chopped its earnings outlook for the year due to a surprising jump in medical costs.

A complex mix of health care utilization issues drove the painful surprise for investors in the Eden Prairie-based health care giant.

It was the largest single-day drop in UnitedHealth’s stock price since the 1990s, when it was a much smaller company.

“We must and will execute to better anticipate and address these factors,” said Andrew Witty, UnitedHealth Group chief executive, during a call with investors. He described the company’s performance as “unusual and unacceptable.”

Medicare Advantage patients utilized more care than expected during the first three months of the year, a jump that hurt first-quarter financial results at the company’s UnitedHealthcare division, the nation’s largest health insurer.

The dynamic also extended to its Optum health services business, which runs a network of clinics and surgery centers across the country.

Medicare patients new to Optum’s health care providers generated less revenue than expected because medical coding submitted previously to the government didn’t reflect their full spectrum of health problems, company officials said. The problem was compounded by a further tightening by Medicare of risk-based funding to insurers.

“There is no doubt this was a big surprise,” John Boylan, an analyst with Edward Jones, wrote in a research note. “We, and likely other investors, believe[d] that United properly accounted for higher care costs in its 2025 insurance rates after seeing much higher-than-normal costs in 2024. Clearly this was not the case, as costs remain elevated.”

UnitedHealth Group says it now expects adjusted earnings per share this year to be about 12% lower than previously forecast. Revenue and profit during the first quarter both fell short of analyst expectations — a rare miss for the company.

The plunging share price was an abrupt reversal since UnitedHealth Group’s stock in recent weeks outperformed the market. Investors have viewed the company’s shares as a “tariff safe haven,” since United’s health insurance and health care service businesses largely operate only domestically.

Until Thursday, UnitedHealth had been one of the only stocks in Minnesota to show gains amid the tariff-related turbulence this month.

Medical spending has been on the rise over the past two years, and UnitedHealthcare expected the rate of growth to continue, but was surprised by further acceleration in Medicare Advantage. Those health plans are a privatized version of the federal health insurance program for seniors and certain populations with disabilities.

Utilization was particularly high in physician and outpatient services for Medicare patients but did not extend to United’s business managing benefits for employer groups and state Medicaid programs.

Medicare Advantage patients in the first quarter made more primary care and wellness visits than expected, but the real issue was greater follow-up visits for costly specialty care, said Tim Noel, chief executive for the UnitedHealthcare business.

In Medicare Advantage, insurers have incentives to make sure coding submitted to the government fully reflects the health problems of enrollees, since these risk scores drive higher payments.

This incentive carries over to Optum’s clinic network because health care providers often receive “capitated” payments for their services, meaning a per-member, per-month fee paid up front rather than payments for each service provided afterward.

“Our patient profile [after last fall’s open enrollment] included many new to Medicare as well as new to Optum Health who were meaningfully less engaged by their prior health plans and providers,” said Dr. Amar Desai, chief executive at Optum Health.

Witty said the company would respond by “appropriately assessing and updating the health status of new patients, especially those at high risk levels.”

Desai added: “We’re ... enhancing access to employee and network [primary care providers], especially around new patients, to diagnose, document and treat conditions. We’re expanding home-based revisits and wraparound services, particularly as it relates to post-discharge visits after inpatient care.”

Another factor was the continuation of a multi-year change to Medicare’s system for risk-scoring payments, including additional shifts to the model that started in January. Witty has described these changes as a “price cut” for Medicare Advantage, one amounting to about a 9% reduction, he said Thursday, across the industry.

“To be sure, it is complicated, but we are not executing on the model transition as well as we should,” Witty said.

Desai added: “We underestimated the impact of [the changes], in particular as it relates to the higher acuity structure of our patient population, which is more impacted by the risk model change.”

Executives and investors focused on the issues with Optum Health because the division is a key part of UnitedHealth Group’s long-term focus on “value-based care,” which is when health care providers are paid based on patient health outcomes and economic efficiency, instead of just billable encounters with providers.

“While we are decidedly unsatisfied with these [first quarter] results, our growth and foundation for improvement remains solid,” Witty said. “UnitedHealthcare’s Medicare Advantage business is on pace to serve an additional 800,000 people this year. Optum Health is on track to add 650,000 net new patients to value-based care arrangements.”

Company officials said they’re encouraged by a Trump administration announcement this month for higher payment rates down the road to Medicare Advantage plans. Analysts say bullish investors will point to the increase, as well as state-level negotiations for better Medicaid health plan payment rates, to justify continued optimism about UnitedHealth Group despite Thursday’s sell-off.

“UnitedHealth remains the strongest managed care organization we cover with significant margin for executional error like we are currently seeing,” Julie Utterback, an analyst with Morningstar, wrote in a note to investors. “Although we are keeping our capital allocation rating at exemplary for now, executional errors like these are starting to weigh on our investment assessment.”

Even so, Utterback reiterated the refrain that’s recently buoyed the company’s stock price: “As a US-based and US-focused firm, UnitedHealth looks largely immune to tariffs.”

After adjusting for one-time factors, UnitedHealth Group posted a first-quarter profit of $6.61 billion, up about 3% from $6.43 billion during the same period last year. On a per-share basis, the earnings were $7.20, compared with $7.27 expected by analysts.

Revenue of $109.6 billion fell short of Wall Street expectations for $111.4 billion.

The lower financial guidance for the year means UnitedHealth Group now expects an adjusted annual profit in the range of $23.7 billion to $24.3 billion, down from the previous range of about $27.1 billion to $27.7 billion.

Just over 50 million people in the U.S. had health insurance coverage from UnitedHealthcare as of March 31, an increase of 780,000 people compared with the year-end tally.

Patrick Kennedy of the Minnesota Star Tribune contributed to this story.