Updated 2 p.m. ET
UnitedHealth Group is taking steps to address headwinds facing its Medicare business, particularly its Medicare Advantage plans, CEO Andrew Witty assured investors Thursday, following the company's disappointing first-quarter results.
The healthcare giant also slashed its 2025 earnings outlook, causing its shares to plunge 23% on Thursday.
Rising care intensity and shifting reimbursement policies impacted the company's insurance arm and its Optum Health business.
“UnitedHealth Group started 2025 in two seemingly disparate ways: One, continued strong growth across our businesses. Our people are providing more health benefits and services to more members and patients as the market responds to our distinct offerings,” Witty said. “The other way, however, was an overall performance that was, frankly, unusual and unacceptable.”
UnitedHealth Group cut its outlook to net earnings of $24.65 to $25.15 per share for the year, down from its previous guidance of net earnings of $28.15 to $28.65 per share. The company also revised its adjusted earnings to $26 to $26.50 per share for 2025, down from its previous guidance of adjusted net earnings of $29.50 to $30 per share.
The company is committed to improving its performance in the rest of 2025 and into 2026, Witty told investors, and returning to "long-term earnings per share growth target of 13% to 16%."
As the country’s largest provider of MA plans, UnitedHealth Group’s struggles signal challenges for other MA players. UnitedHealth's Q1 results also pulled down other health insurers' shares on Thursday. Elevance Health was down 2%, Humana’s shares tumbled 7%, and CVS Health, which owns Aetna, was down about 2%.
“Clearly, we're a leader in all of this marketplace where we're taking almost certainly a bigger fraction, if you will, of the pressure because of our market leadership position here,” Witty said on the earnings cal.
In UnitedHealthcare’s MA business, the company had planned for 2025 care activity to increase at a rate consistent with the utilization trend it saw in 2024, Witty told investors.
Instead, first-quarter 2025 indications suggest care activity increased at twice that rate, he noted.
“Increases in physician and outpatient services were most notable, and inpatient to a lesser extent. This increase in care activity was limited to our MA business and was not a factor in our commercial or Medicaid businesses. Care activity trends in those areas were as expected,” Witty said.
The company also faced unanticipated changes in its Optum Medicare membership, which impacts 2025 revenue. "We added more new Medicare patients to Optum Health, a portion of whom were covered by plans that were exiting markets. 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,” he said.
He added that many of the current and new complex patients UnitedHealth serves are more affected by the Centers for Medicare & Medicaid Services (CMS) risk model changes that the company is in the process of implementing.
“To be sure, it is complicated, but we are not executing on the model transition as well as we should,” Witty said.
The CMS continues to phase in changes to the MA risk adjustment model.
Last year, insurers faced headwinds with a spike in utilization in MA alongside other challenges in that space like updates to the methodology used to calculate the program's star ratings, lowered payment rates and pushback from providers.
UnitedHealth is taking steps to address these factors and better anticipate changes, Witty said.
“First, 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,” he said.
The healthcare giant also is appropriately assessing and updating the health status of new patients, especially those at high risk levels.
To more effectively transition to the new CMS risk model, the company is “investing significantly in improving physicians’ clinical workflow to help ensure better care and timely insights on when and where care is most efficient and effective,” Witty said.
“Finally, our Medicare Advantage plan designs and pricing for 2026 will be fully informed by these trends,” he added.
MA payment rates increased more than expected in 2026, which will provide some relief for MA insurers.
Investors also seemed surprised by the higher utilization trends in the first quarter.
“We, and likely other investors, believe that United properly accounted for higher care costs in its 2025 insurance rates after seeing much higher-than-normal costs in 2024. Clearly this was not the case, as costs remain elevated,” John Boylan, senior healthcare analyst at Edward Jones, wrote in a equity research note. “Costs at Optum (services) were also high in part because we believe members were using more services than expected compared with last year and other factors. This was an unexpected miss versus our expectations, as we don't often see drama from Optum."
Boylan added, “We believe the company can return to growth rates we have seen in the past, but it will take longer than we expected.”
UnitedHealth Group’s chief financial officer John Rex confirmed the company is maintaining its 2025 revenue outlook of $450 billion to $455 billion. “Within this, we expect revenues for both UnitedHealthcare and Optum Rx to be better than our initial view, offsetting a reduced outlook at Optum Health,” he told investors Thursday.
The full-year medical care ratio is now expected to be 87.5% plus or minus 50 basis points, reflecting higher utilization across senior populations and the patient mix and revenue profile of Optum Health, Rex said.
Initially reported at 7:45 a.m. ET
UnitedHealth Group reported $6.29 billion in profit for the first quarter of 2025, or $6.85 a share, far exceeding its performance in the same quarter a year ago. In the first quarter of 2024, the healthcare giant reported a loss of $1.41 billion, or a loss of $1.53 a share.
First-quarter 2025 revenue jumped 9.8% to reach $109.6 billion, up $9.8 billion from $99.8 billion a year ago.
But UnitedHealth Group cut its earnings guidance after reporting higher-than-expected care costs in its Medicare Advantage businesses, "far above" the planned 2025 increase. The "heightened care activity indications within UnitedHealthcare’s Medicare Advantage businesses" became "visible as the quarter closed," the company said in an earnings press release issued Thursday morning.
"This activity was most notable within physician and outpatient services," the company said.
UnitedHealth Group cut its outlook to net earnings of $24.65 to $25.15 per share for the year and adjusted earnings of $26 to $26.50 per share for 2025. That's down from previous guidance of net earnings of $28.15 to $28.65 per share and adjusted net earnings of $29.50 to $30 per share.
The company also cited "unanticipated changes in the profile of Optum Health members impacting planned 2025 reimbursement due to unexpectedly minimal 2024 beneficiary engagement by plans exiting markets."
Further, executives cited "greater-than-expected impact to current and new complex patients from the ongoing Medicare funding reductions enacted by the previous administration."
“UnitedHealth Group grew to serve more people more comprehensively but did not perform up to our expectations, and we are aggressively addressing those challenges to position us well for the years ahead, and return to our long-term earnings growth rate target of 13 to 16%,” said Andrew Witty, CEO of UnitedHealth Group, in a statement.
"The company believes these factors to be highly addressable over the course of this year as well as it looks ahead to 2026," executives said in the press release.
UnitedHealth Group reported adjusted earnings of $7.20 a share for the quarter.
Both first-quarter revenue and earnings missed Wall Street analysts' expectations. Analysts had been expecting adjusted earnings of $7.29 per share for the quarter and revenue of $111.58 billion, according to FactSet.
The first quarter medical care ratio was 84.8%, a slight uptick from 84.3% in 2024. The increase was primarily due to the revenue effects of both the ongoing Medicare funding reductions and member mix and the higher senior care activity, partially offset by the Medicare Part D program changes which affected seasonality, according to the company.
In the earnings report, the UnitedHealthcare unit reported $84.6 billion in revenue for the first quarter, growing $9.3 billion year-over-year or 12%.
The health insurance division added 700,000 commercial members in the first quarter, according to the report, the number of people served by the company’s offerings for seniors and people with complex needs grew by 545,000 in the first quarter and remains expected to grow up to 800,000 in 2025.
People served by the company’s state-based community plans increased to 7.6 million members, and the company expanded customer relationships in Kentucky, New York and Florida.
At Optum, Q1 revenues were up by 4.5%, reaching $63.9 billion. Its Optum Health revenues dipped 5% to $25.3 billion. The year-over-year change reflected growth in patients served, offset by legacy customer contract revisions and the member profile factors executives noted in the press release. Optum Health continues to expect to grow to serve 650,000 new value-based care patients in 2025.
By the end of 2025, Optum expects to have about 5.4 million value-based care patients, according to the company.
Revenue at Optum Rx, the company's pharmacy benefit manager, increased by 15% in 2024 as it added new clients and built on the relationship with existing ones. It also enhanced the pharmacy services it made available to customers throughout the year, according to the report.
Optum Rx revenues were $35.1 billion, up 14% year-over-year. Executives cited strong growth driven by new clients served as well as expanded relationships with existing clients. Adjusted scripts grew to 408 million, compared to 395 million last year.
UnitedHealth shares fell 19% in premarket trading Thursday.
The company is holding a call with investors at 8:45 am ET to review its first-quarter financial performance.
This is a developing story.