UnitedHealth Group Reports $6 Billion Q1 Profit Despite Medicare Cost Concerns

UnitedHealth’s stock plunged over 22% in a single day—its worst performance since 1998—as Medicare costs devastated the healthcare giant’s outlook despite reporting $6 billion in quarterly profits.

At a Glance

UnitedHealth reported first-quarter profits exceeding $6 billion but drastically cut its full-year earnings forecast due to surging Medicare costs
The company’s stock dropped over 22% in a single day, erasing more than $120 billion in market value
CEO Andrew Witty called the performance “unusual and unacceptable” as medical care ratios jumped due to increased senior healthcare utilization
Biden administration policy changes reducing Medicare Advantage reimbursement rates have compounded the company’s financial challenges
UnitedHealth’s struggles may signal broader trouble for the entire health insurance industry

Record Profits Overshadowed by Massive Stock Collapse

UnitedHealth Group’s announcement of $6 billion in first-quarter profits should have been cause for celebration among investors. Instead, April 17 turned into a financial nightmare for the healthcare giant when its stock plummeted more than 22%—marking its worst single-day performance since August 1998. The catastrophic drop wiped out over $120 billion in market value in just hours after the company significantly slashed its full-year profit guidance and missed earnings expectations for the quarter. First-quarter adjusted earnings per share came in at $7.20, below the $7.27 analysts expected, while revenue reached $109.6 billion, failing to hit the anticipated $111.6 billion mark.

The company now forecasts adjusted full-year profits between $26 and $26.50 per share, drastically lower than the previous outlook of $29.50 to $30 per share. This dramatic revision sent shockwaves through the entire healthcare sector, dragging down other insurers’ stocks as investors feared similar problems might plague UnitedHealth’s competitors. The stock collapse was so significant that it single-handedly pulled down the Dow Jones Industrial Average, highlighting UnitedHealth’s massive influence on the broader market and raising serious questions about the stability of the healthcare insurance industry as a whole.

Medicare Advantage Squeeze: Biden Policies Take Their Toll

At the heart of UnitedHealth’s financial troubles is a perfect storm hitting its Medicare Advantage business—a program that covers more than half of the nation’s Medicare beneficiaries. The company reported “heightened care activity” in its Medicare Advantage business that dramatically exceeded planned levels. This surge in healthcare utilization comes partly from seniors catching up on procedures delayed during the COVID-19 pandemic, creating a backlog of expensive medical needs. Simultaneously, the Biden administration has implemented policy changes that reduced reimbursement rates for Medicare Advantage plans, creating a financial vise for UnitedHealth as costs rise while payments shrink.

“UnitedHealth Group started 2025 in two seemingly disparate ways. One, continued strong growth across our businesses. The other way, however, was an overall performance that was frankly unusual and unacceptable.” – Witty

The company’s medical care ratio—the percentage of premium dollars spent on medical care—increased to 84.8% from 84.3% in 2024. This critical metric is projected to rise even further to 87.5% this year, indicating a significant deterioration in profitability. This squeeze on margins illustrates how the Biden administration’s policies are undermining the fiscal stability of private Medicare providers while simultaneously driving up healthcare costs. As government reimbursement rates fail to keep pace with actual medical expenses, insurers like UnitedHealth face increasingly difficult choices about their participation in government healthcare programs.

Patient Inheritance Issues and Industry-Wide Implications

Adding to UnitedHealth’s woes, the company inherited sicker patients from other insurers that exited unprofitable Medicare Advantage markets due to escalating costs and inadequate reimbursement rates. These patients, according to CEO Andrew Witty, “experienced a surprising lack of engagement last year,” resulting in 2025 reimbursement levels “well below what we would expect and likely not reflective of their actual health status.” This situation highlights a fundamental flaw in how government programs assess patient health and determine payment rates, potentially encouraging insurers to cherry-pick healthier patients to maintain profitability.

“It’s very, very unusual,” Lance Wilkes, Bernstein senior equity analyst, told CNBC’s “Squawk Box” on Thursday.” – Lance Wilkes

The ripple effects of UnitedHealth’s earnings disappointment extended far beyond its own stock. Competitors like Humana, CVS Health, and Cigna all saw their shares tumble as investors worried about similar cost pressures across the industry. Analyst Ryan Langston from TD Cowen noted “ominous signs” of accelerating medical costs in Medicare Advantage businesses, while other analysts questioned whether UnitedHealth’s problems might represent a company-specific issue or a broader industry challenge. Adding to the company’s challenges, UnitedHealth is under government investigation for its Medicare billing practices, creating additional regulatory uncertainty at a time when the company can least afford it.