Unitedhealth GroupThe shares sank 20% on Thursday after the company reduced its annual earnings, citing higher medical costs than expected in its private administration Medicare plans.
According to some Wall Street analysts, those bleak results of a medical care giant seen as the Bellwether of the insurance industry could be a warning signal for other companies with the so -called Medicare advantage plans, according to some Wall Street analysts. It occurs after a turbulent 2024 for health insurers, harmed by the lowest government payments, high medical costs and public reaction after the murder of the principal executive of UnitedHealthcare, Brian Thompson.
United United, the Insurance Arm of Unitedhealth Group, is the largest supplier of those nation's plans. Competitor actions Human 5%fell, while Elevation health more than 1% fell and CVS It fell 2%. CIGNA It does not have a Medicare Advantage business. Their shares rose almost 1% on Thursday.
The results of the first quarter of UnitedHealth reveal “ominous signs” of accelerating medical costs in Medicare Advantage companies, TD analyst Cowen Ryan Langston said Thursday in a note on Thursday. He added that the company “foreshadowed” increasing medical costs in 2023, so Thursday's comments “will question” the prospects of the whole year for each insurer.
The highest medical costs have pursued the entire insurance industry during the last year as more older people return to hospitals to undergo procedures that had delayed during the COVID-19 pandemic, such as joint and hip replacements. But the problem had not been so significant in Unitedhealthcare.
Barclays analyst Andrew Mok said that UnitedHealth's problems can be a minor problem for companies that made “significant” outings of some Medicare Advantage markets, including human and CVS, according to a note on Thursday. Last year, many insurers left the non -profitable markets of Medicare Advantage due to the highest medical costs and lower reimbursement rates of the federal government.
Meanwhile, the problem could be a greater treatment for companies that won a greater market share in Medicare's advantage, such as the health of elevation and Alignment healthAccording to Mok.
UnitedHealth said that the increase in the use of attention or use, in its Medicare Advantage business, came far from what the company planned for the year, that it was that the attention activity increases to a rate consisting with what it saw in 2024. But the trends that were made evident towards the end of the first quarter suggest that the activity of the attention increased “at that level,” said the activity, ” UnitedHealth Group and Witty during a Gernings call on Thursday.
The jump was particularly remarkable in medical and outpatient services, which do not imply hospital stays during the night, he added.
“It's very, very unusual,” Lance Wilkes, Bernstein Variable rental, “Squawk Box” of CNBC said Thursday. He said that the growing use is “really surprising” that comes out of the high level of attention activity that the industry saw during the past year.
Wilkes added that Unitedhealth and the industry in general can be “withdrawing” the “intensity of part of the activity they do to handle use”, which causes dissatisfaction among patients. For example, some insurers require prior authorization, which causes suppliers to obtain the approval of a patient's insurance company before administering specific treatments.
“I think it is probably retired from United due to the winds against the company's policy and scrutiny,” Wilkes said. “I think the horrible thing that happened to Brian Thompson and the company is part of this, and I think it also reflects the scrutiny of the Department of Justice in United in the last two years.”
According to the reports, Unitedhealth is dealing with a government investigation of its Medicare billing practices.
Also on Thursday, UnitedHealth pointed out issues related to changes in the profile of patients treated under their Optum medical care unit. This segment includes its pharmacy benefits manager, which negotiates drug refunds with manufacturers in the name of insurers and maintains forms, among other responsibilities.
But Witty said the company is taking measures to improve the results and considers the problems related to OPTUM and highly directable medical costs as we look at 2026 “.
At least, insurers are ready to get an impulse next year. The Trump administration in April said it would substantially increase reimbursement rates for Medicare Advantage insurers, walking through an earlier proposal of the Biden administration.
