UnitedHealth Stock Plunges 22% After Q1 Miss, Profit Guidance Slashed on Medicare Cost Surge
UnitedHealth Group (NYSE: UNH) suffered its steepest single-day stock drop in over 25 years on Thursday, falling 22.38% to $454.11, after posting disappointing Q1 2025 earnings and slashing its full-year profit forecast. The plunge wiped more than $120 billion off the company’s market capitalization and dragged down the Dow Jones Industrial Average (^DJI).
The last time UnitedHealth stock saw a similar one-day drop was August 1998, underscoring the severity of the market reaction.
Q1 Earnings Miss
For the first quarter, UnitedHealth reported:
- Adjusted EPS: $7.20 vs. $7.27 expected
- Revenue: $109.6 billion vs. $111.6 billion expected (Bloomberg consensus)
CEO Andrew Witty acknowledged the results fell short of expectations and promised immediate corrective actions.
“We did not perform up to our expectations, and we are aggressively addressing those challenges to position us well for the years ahead,” Witty said in a company statement.
Slashed Full-Year Guidance
The health insurance giant revised its full-year adjusted EPS forecast to a range of $26 to $26.50, a major downgrade from the previous $29.50 to $30 range.
This sharp cut reflects rising medical costs, especially within its Medicare Advantage and Optum Health segments — two core business units that cater to senior healthcare and in-home medical services.
Medicare Advantage: A Costly Pain Point
UnitedHealth said higher-than-expected utilization of healthcare services by Medicare Advantage enrollees, particularly seniors, significantly drove up expenses.
The company now anticipates a medical care ratio — the percentage of premiums spent on medical services — of 87.5% for 2025, up from 85.5% last year and 83.2% in 2023.
Adding fuel to the fire, the company blamed lower government reimbursement rates introduced by the Biden administration. These policy changes aim to curb systemic abuse of Medicare Advantage but have shifted more financial burden onto insurers.
“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,” Witty said.
Optum Growth Overshadowed by Systemic Strains
Despite the challenging quarter, UnitedHealth pointed to underlying growth in its Optum Health arm, which added 650,000 net new patients, and said its Medicare Advantage business is on track to serve an additional 800,000 people in 2025.
However, the influx of patients — some from exiting plans — included a disproportionately high number of individuals with more complex health conditions than initially assessed, further straining margins.
Path to Recovery: CEO Sees “Highly Addressable” Issues
Witty attempted to reassure investors that these operational setbacks were “highly addressable.” The company is now ramping up its efforts to:
- Better engage high-risk seniors in value-based care
- Increase home visits and health status updates
- Implement stricter clinical monitoring for new Medicare patients
“We are consistently engaging with members in their homes and appropriately assessing and updating the health status of new patients,” Witty noted during the earnings call.
While the company remains unsatisfied with its results, Witty emphasized UnitedHealth’s “solid growth and foundation for improvement.”
Key Highlights:
- Stock drop: -22.38%, worst since August 1998
- Q1 EPS: $7.20 (missed); Revenue: $109.6B (missed)
- Full-year EPS cut: $26–$26.50 (down from $29.50–$30)
- Medical care ratio: Now projected at 87.5%
- Market cap loss: ~$120 billion