UnitedHealth GroupShares sank 20% on Thursday after the company cut its annual profit forecast.
According to some Wall Street analysts, these darkness stems from the healthcare giants considered the innate of the insurance industry, which could be a warning sign for other companies with so-called Medicare Advantage plans. It comes after turbulent 2024 for health insurance companies, hurt by lower government payments, rising medical costs and public backlash after killing UnitedHealthcare’s top executive Brian Thompson.
UnitedHealthCare, the insurance division of UnitedHealth Group, is the nation’s largest provider of these plans. Competitor stocks Humana 5% dropped eLlevance Health I lost over 1% CVS I fell 2%. Signa There is no Medicare Advantage business. That inventory rose almost 1% on Thursday.
TD Cowen analyst Ryan Langston reveals “sinister signs” that UnitedHealth’s first quarter results will accelerate health costs for the Medicare Advantage business. He added that Thursday’s comments “question” the full-year outlook for all insurance companies as the company “correctly foresaw” medical costs in 2023.
Over the past year, higher healthcare costs have been bothering the entire insurance industry as more seniors return to hospitals and undergo delayed procedures during the Covid-19 pandemic, including joint and hip replacements. However, this issue was previously less important in UnitedHealthcare.
Barclays analyst Andrew Mock said UnitedHealth issues aren’t that much of a problem for companies that have “significant” exits from some Medicare Advantage markets, including Humana and CVS, according to a memo on Thursday. Last year, many insurers closed the unprofitable Medicare advantage market due to increased federal healthcare costs and lower reimbursement rates.
Meanwhile, this issue could be a bigger deal for companies such as Excel Health and have gained greater market share due to Medicare advantages. Alignment Healthaccording to Mok.
UnitedHealth said the increase in use or use of care in Medicare Advantage’s business is far greater than what the company had planned this year.
Jump was particularly notable for its doctors and outpatient services without overnight hospital stays, he added.
“It’s very rare,” Bernstein’s senior equity analyst Lancewilkes told CNBC’s “Scoobox” on Thursday. He said the increase in use is “really surprising” from the high levels of care activities the industry has seen over the past year.
Wilkes added that UnitedHealth and the wider industry could “retract back” the “several strength of the activities that will be done to manage utilization” that will cause dissatisfaction among patients. For example, some insurers require prior approval, allowing providers to obtain approval from the patient’s insurance company before administering a particular treatment.
“I think it’s probably back together, probably because of policy headwinds and company scrutiny,” Wilkes said. “I think this is part of the horrifying things that happened to Brian Thompson and the company, and I think it also reflects United’s Department of Justice scrutiny over the last few years.”
UnitedHealth is reportedly working on a government investigation into Medicare claims practices.
Also on Thursday, UnitedHealth noted issues related to changing profiles of patients treated under the Optum Health-Care unit. This segment includes pharmacy benefits managers who negotiate drug rebates with manufacturers on behalf of insurance companies, and remain strong among other responsibilities.
However, Witty said the company is taking action to improve results, and believes issues related to Optum and rising healthcare costs are “very addressable as we look to 2026.”
If nothing else, the insurance company will be supported again next year. In April, the Trump administration said it would significantly increase the reimbursement rates for Medicare Advantage insurance companies and hike previous proposals from the Biden administration.
