UnitedHealth Group shares plunged more than 20% Thursday after the insurer slashed its full-year profit forecast, citing significantly higher-than-expected medical costs tied to its Medicare Advantage business. The sharp decline erased tens of billions in market value and rippled through the broader health insurance sector, sending peer stocks tumbling.
The company now expects adjusted earnings per share between $26 and $26.50 for 2025, well below its previous guidance of $29.50 to $30 and sharply under analysts' consensus estimate of $29.73, according to LSEG. The revised outlook triggered a broad selloff across the sector, with shares of Cigna, CVS Health, Elevance, Centene, and Humana falling between 3% and 13% in premarket trading.
"Nobody was expecting this level of a miss or cut to guidance," said Kevin Gade, chief operating officer at Bahl & Gaynor, a holder of UnitedHealth shares. "This was a stock that was a safe haven for so many among tariffs and policy uncertainty."
UnitedHealth reported first-quarter revenue of $109.6 billion, missing Bloomberg consensus estimates of $111.6 billion. Adjusted EPS of $7.27 matched forecasts. CEO Andrew Witty called the performance "unusual and unacceptable," telling analysts the company is "aggressively addressing those challenges to position us well for the years ahead."
Witty attributed the weak performance primarily to its Medicare Advantage plans, where demand for outpatient and physician services "was far above the planned 2025 increase." The company reported a medical care ratio of 85.5% last year, up from 83.2% in 2023. The measure, which represents the percentage of premiums paid out for medical care, was driven higher in part by cuts in Medicare funding under the prior administration.
Additional pressure is coming from changes in Optum Health membership and a "greater-than-expected impact to current and new complex patients" due to Medicare reimbursement changes, the company said.
UnitedHealth's selloff dragged down the Dow Jones Industrial Average, where it is a major component, and triggered steep losses across the managed care space. However, hospital operators benefited from the news, with shares of HCA Healthcare and Tenet Healthcare rising between 3% and 7% on optimism that rising patient volumes may boost hospital revenues.
