The surprising news that UnitedHealth Group was lowering its profit forecasts for 2025 shocked Wall Street and investors but the company still made more than $6 billion and is growing rapidly.
UnitedHealth Group chief executive officer Andrew Witty pleaded his case with analysts and investors Thursday morning after the company’s first quarter earnings report that revealed a big drop in the company’s forecasted earnings per share.
UnitedHealth lowered its “2025 performance outlook established in December 2024 to net earnings of $24.65 to $25.15 per share and adjusted earnings of $26 to $26.50 per share.” That compares to a forecast affirmed in January that said net earnings would be “$28.15 to $28.65 per share.”
The stock was pummeled, which is something that rarely, if ever, happens to a company like UnitedHealth, which owns the nation’s largest health insurer in UnitedHealthcare and also Optum, one of the nation’s largest healthcare services companies. Optum owns an array of physician practices, outpatient care clinics and others sides and OptumRx, one of the biggest pharmacy benefit managers in the country.
Shares of UnitedHealth were down more than 20% by early afternoon trading on the New York Stock Exchange on a day stocks were down generally after Donald Trump lashed out at Federal Reserve Chairman Jerome H. Powell.
The company reported net income of $6.3 billion in the first quarter compared to a $1.4 billion loss in the first quarter of 2024. Revenues grew by nearly $10 billion to $109.6 billion in the first quarter.
But the company is seeing rising costs in its Medicare Advantage plans, which provide benefits for seniors who are flocking to healthcare services far more than the company anticipated.
“In UnitedHealthcare’s Medicare Advantage business we had planned for 2025 care activity to increase at a rate consistent with the utilization trend we saw in 2024,” Witty told analysts. “Instead though, first quarter 2025 indications suggest care activity increased at twice that rate. Increases in physician and outpatient services were most notable, and inpatient to a lesser extent.”
UnitedHealth said its medical care ratio, or MCR, which is the percentage of premium revenue that goes toward medical costs was 84.8% compared to 84.3% in 2024.
UnitedHealth, like other insurers, enjoyed much lower MCRs during the Covid-19 pandemic when patients put off seeing their doctor or avoided healthcare altogether during the shutdowns of 2020. “The full year 2020 medical care ratio of 79.1% declined from 82.5% in 2019” due in part to “disrupted care patterns earlier in the year,” UnitedHealth Group said in its full-year earnings report in 2020, the year Covid began its spread.
Meanwhile, the federal government is slowing spending on Medicare Advantage and there’s speculation that the Trump administration may further cut Medicare spending to pay for tax cuts.
To blunt the federal government’s moves, Witty said the following:
- “We are ensuring the complex patients most impacted by the previous administration’s Medicare funding cuts engage in clinical and value-based programs.”
- “Second, we are consistently engaging with members in their homes and in post-discharge settings. Engagement remains the key.”
- “Third, we are appropriately assessing and updating the health status of new patients, especially those at high risk levels.”
- “Fourth, to more effectively transition to the new (Centers for Medicare & Medicaid Services) risk model, we are investing significantly in improving physicians’ clinical workflow to help ensure better care and timelier insights on when and where care is most efficient and effective.”
- “Finally, our (Medicare Advantage) plan designs and pricing for 2026 will be fully informed by these trends.”
All of these commitments made by Witty come as the company adds customers across its businesses that include not only UnitedHealthcare’s Medicare Advantage plans, but Medicaid plans for low income Americans and medical care providers under the Optum umbrella.
“UnitedHealthcare’s (Medicare Advantage) business is on pace to serve an additional 800,000 people this year,” Witty said of a business that already has more than 8.2 million enrollees. “Optum Health is on track to add 650,000 net new patients to value-based care arrangements. In Medicaid, we are growing and continue to see positive momentum in closing the gap between people’s health status and state rates and we are appreciative of our state customers for the ongoing productive discussions.”