UnitedHealth Adjusts 2025 Forecast Following Surge in Care Utilization: What This Means for You

UnitedHealth experienced a significant drop in its stock price after reporting unexpected cost increases in its Medicare Advantage plans. This news impacted not just UnitedHealth, but also had a ripple effect on other health insurers.

In the first quarter, UnitedHealth’s care usage among Medicare Advantage enrollees rose at double the rate they anticipated. CEO Andrew Witty described this spike as “unusual and unacceptable,” but he assured analysts that it’s a temporary issue that can be resolved.

The company, which:

• Operates the largest health insurer in the U.S., covering over 50 million people,
• Also runs a major pharmacy benefit manager and a growing health services segment called Optum,
  saw its stock tumble by over $130—its biggest plunge in 25 years.

With more than 8 million members, UnitedHealthcare leads the Medicare Advantage market, which is designed for individuals aged 65 and older. But keeping profit margins stable in this sector has been challenging. Funding cuts from the Biden administration, combined with the rising costs of care, have put pressure on insurers. However, Daniel Barasa, a portfolio manager at Gabelli Funds, noted that a proposed rate increase for 2026 might ease some of these financial strains starting next year.

Despite the setback, UnitedHealth reported a $6.3 billion profit for the quarter, a significant rebound from a $1.41 billion loss last year, largely due to a cyberattack that hit its Change Healthcare operations. Their adjusted earnings came in at $7.20 per share, slightly under what analysts had predicted.

Looking ahead to 2025, UnitedHealth has adjusted its earnings forecast, now predicting adjusted earnings between $26 and $26.50 per share—down from an earlier estimate of $29.50 to $30. The company’s stock was down 23% to about $450.30 in response to these developments, marking a notable decline that influenced the Dow Jones Industrial Average, of which it is a part.

UnitedHealth’s early reporting offers insights into trends for the sector as a whole. Other health insurers are facing similar challenges, although none showed as steep a decline as UnitedHealth. For example, Elevance Health, another major insurer covering 2 million Medicare Advantage members, is anticipated to report stronger than expected earnings later this month.

This unexpected surge in care usage within Medicare Advantage plans reflects broader trends. According to a recent report from the Kaiser Family Foundation, about 34% of Medicare beneficiaries were enrolled in Medicare Advantage plans as of 2022, up from 27% in 2016. This rapid growth means that changes in care patterns and costs could have significant implications for insurers and their customers alike. As the healthcare landscape continues to evolve, investors and analysts alike will be closely monitoring these developments to understand their long-term impacts.

For further insights, you can check out the Kaiser Family Foundation for detailed statistics and trends in Medicare Advantage coverage.

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