Unh Stock Shares Tumble Up to 22% as Medicare Costs Trigger Earnings Miss

UNH stock experiences worst single-day performance since 1998 as Medicare Advantage costs soar

April 17, 2025 – UnitedHealth Group (UNH) shares tumbled as much as 22% in morning trading today after the healthcare giant reported first-quarter earnings that fell significantly short of Wall Street expectations. The dramatic selloff erased over $100 billion from the company’s market capitalization and dragged down the Dow Jones Industrial Average.

Medicare Costs Drive Disappointing Results

The primary reason for the earnings shortfall was a surprising surge in medical costs within UnitedHealth’s Medicare Advantage business. The company reported much higher-than-anticipated demand for outpatient and physician services among its Medicare Advantage members.

“We did not perform up to our expectations,” acknowledged UnitedHealth Group CEO Andrew Witty during an investor call, promising the company is “aggressively addressing those challenges to position us well for the years ahead and return to our long-term earnings-growth rate target.”

UnitedHealth posted adjusted earnings per share of $7.20 for the first quarter, below analysts’ expectations of approximately $7.29. Revenue also missed forecasts, coming in at $109.6 billion versus anticipated figures between $111.4-$111.6 billion.

UNH Stock Outlook Significantly Reduced

In a move that further rattled investors, UnitedHealth slashed its full-year profit forecast for 2025 by approximately 12%. The company now expects adjusted earnings per share to range between $26.00 and $26.50, down from the previous guidance of $29.50 to $30.00.

This downward revision suggests the company anticipates higher Medicare costs and utilization trends to persist throughout the year, representing a potentially fundamental shift in their cost structure or the dynamics of the Medicare Advantage market.

Key Factors Behind the UNH Stock Decline

Several specific factors contributed to UnitedHealth’s earnings miss:

• A significant increase in the medical-care ratio to 84.8% from 84.3% in the same period last year, meaning the company paid out a larger portion of its premiums on insurance claims
• A “surprise jump in seniors getting treatment” across outpatient and physician services
• Patients in UnitedHealth’s care-providing Optum Health arm being less healthy than expected
• Ongoing Medicare funding reductions putting additional pressure on margins

Broader Impact on Healthcare Sector

The negative news surrounding UNH stock sent ripples through the broader health insurance sector. Shares of rivals including Elevance Health, CVS Health, Cigna, Centene, and Humana all declined, with drops ranging from 3% to 13%.

Reports indicate the overall health insurance sector lost over $130 billion in market capitalization on the day. Interestingly, while insurers stumbled, hospital operators like HCA Healthcare and Tenet Healthcare saw their stocks rise, potentially buoyed by expectations of sustained high demand for healthcare services.

UnitedHealth’s Response and Recovery Plan

UnitedHealth’s management has indicated they believe these challenges are “highly addressable” over the course of this year and as they look ahead to 2026. The company mentioned a focus on cost containment and innovation in healthcare delivery as key strategies.

Investors will be closely monitoring UnitedHealth’s ability to effectively mitigate the higher Medicare costs and improve its forecasting accuracy. The credibility of their recovery plan will be a crucial factor in whether UNH stock can rebound from this significant setback.

What This Means for Investors

This rare earnings miss from UnitedHealth highlights the sensitivity of UNH stock to any adverse news affecting the Medicare Advantage market. As a significant component of the Dow Jones Industrial Average, the company’s performance impacts the broader market.

For investors, the key question remains whether this represents a temporary setback or signals more fundamental challenges in the Medicare Advantage business model. The simultaneous decline in other health insurance stocks suggests the market views UnitedHealth’s Medicare challenges as potentially indicative of broader pressures within the industry.

Despite these challenges, UnitedHealth continues to report revenue growth, though the earnings miss demonstrates that top-line growth alone is insufficient for profitability if costs are not effectively controlled.

This article is for informational purposes only and does not constitute investment advice.