UnitedHealth (UNH) stock cratered as much as 21% Thursday after its first quarter earnings missed expectations and the company cut its full-year profit guidance, dragging down the blue chip Dow Jones Industrial Average (^DJI).
The health insurance giant now expects adjusted full-year profits to fall in a range between $26 and $26.50 per share, down from its prior forecast for adjusted EPS to come in between $29.50 and $30.
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United Health for its first quarter reported adjusted earnings per share of $7.27 versus the $7.27 expected and revenue of $109.6 billion versus the $111.6 billion expected, according to Bloomberg consensus estimates.
In a statement, UnitedHealth CEO Andrew Witty said the company “did not perform up to our expectations, and we are aggressively addressing those challenges to position us well for the years ahead.”
The company cut its forecast to account for higher-than-anticipated costs related to its Medicare Advantage — which offers private supplemental plans to Medicare recipients — and Optum businesses. Optum delivers care to UNH clients, including Medicare Advantage users.
“United Health Group started 2025 in two seemingly disparate ways,” Witty said separately in a call with analysts.
“One, continued strong growth across our businesses,” he said. He said Medicare Advantage business is set to serve an additional 800,000 people this year, while Optum Health is on track to add 650,000 net new patients.
“The other way, however, was an overall performance that was frankly unusual and unacceptable.”
UnitedHealth said government funding cuts during the Biden administration reduced reimbursement rates for Medicare Advantage patients using Optum Health, forcing UnitedHealth to foot the bills to a greater extent and weighing on 2025 profits.
A UnitedHealthcare office building in Santa Ana, Calif. (Reuters/Mike Blake) · Reuters / Reuters
Adding to its troubles, senior patients in its Medicare Advantage business began using more services “far above” the increase planned for this year, the company said. Case in point: Last year, the company reported a medical care ratio — or the amount of premiums collected that were paid out as medical costs — of 85.5%, up sharply from 83.2% the prior year. This year, it expects a ratio of 87.5%. UnitedHealth cited premium hikes for the issue.
And the company inherited patients from other insurers in 2025 that were sicker than they appeared on paper, Witty said.
“We added more new Medicare patients to Optum Health, a portion of whom were covered by plans that were exiting markets,” he said. “They experienced a surprising lack of engagement last year, which led to 2025 reimbursement levels well below what we would expect and likely not reflective of their actual health status.”
” While we are decidedly unsatisfied with these results, our growth and foundation for improvement remains solid,” Witty said.
Witty called the issues “highly addressable” and said the company is focusing on proactively monitoring its senior customers.
“First, we’re ensuring the complex patients most impacted by the previous administration’s Medicare funding cuts engage in clinical and value-based programs,” he said.
He added that the insurer is “consistently engaging with members in their homes” and “appropriately assessing and updating the health status of new patients…[e]specially those at high risk levels.”
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Laura Bratton is a reporter for Yahoo Finance. Follow her on Bluesky @laurabratton.bsky.social. Email her at [email protected].
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