UnitedHealth Crashes 20% on Slashed 2025 Outlook as Medicare Costs Surge

UnitedHealth Group (UNH) delivered a disappointing first-quarter earnings report that rattled markets on Thursday, sending shares plunging by 20% in pre-market trading. The stock cratered from around $590 to $460, erasing a significant chunk of its year-to-date gains and dragging down Dow futures given UNH's position as the second-heaviest weighted component in the index. Investors were alarmed not just by the modest revenue and EPS misses, but by the company slashing its full-year 2025 guidance by nearly 13%, citing elevated utilization rates in its Medicare Advantage business.

The main reason for the guidance cut stemmed from a spike in care activity within UnitedHealthcare’s Medicare Advantage segment. Patients are utilizing more physician and outpatient services than expected, resulting in higher costs for UNH. Compounding this issue, the company flagged unexpected changes in its Optum Health member mix that are affecting anticipated reimbursement rates. These issues were not fully visible until late in the quarter, according to the company.

UnitedHealth operates through two primary segments: UnitedHealthcare, which provides health insurance benefits, and Optum, which includes pharmacy benefits, healthcare delivery, and analytics. UnitedHealthcare remains the company’s largest contributor to revenue, generating $84.62 billion in —25—a 12% increase from a year ago. Optum revenue came in at $63.9 billion, a more modest 4.7% year-over-year gain. However, OptumHealth, a key subsegment, saw revenue drop 5.3% as the company dealt with member shifts and utilization changes.

For the quarter, UNH reported adjusted EPS of $7.20 versus the $7.29 consensus estimate, while revenue of $109.6 billion missed the Street’s $111.6 billion forecast. Operating margin landed at 8.3%, just shy of the 8.45% expectation. The medical care ratio of 84.8% was better than feared but still signaled rising care delivery costs. Net income was $6.47 billion, a recovery from a year-ago loss.

UNH revised its full-year adjusted EPS guidance to $26 to $26.50, down from a prior view of $29.50 to $30 and well below consensus expectations of $29.73. CEO Andrew Witty acknowledged the miss, stating, ";We did not perform up to our expectations, and we are aggressively addressing those challenges to position us well for the years ahead". He emphasized that the challenges were "highly addressable", and that management is committed to returning to its long-term EPS growth target of 13% to 16%.

There is some hope on the horizon for 2026. The Trump administration recently announced a significant 5.06% increase in Medicare Advantage reimbursement rates for 2026, more than double the prior administration's proposed hike. That move is expected to add over $25 billion in industrywide revenue, offering potential relief to players like UNH that have struggled with the economics of Medicare Advantage.

Despite the optimism for future recovery, the near-term technical setup remains fragile. Thursday’s steep gap lower was disruptive, with no meaningful bounce observed during pre-market hours. This price action suggests downside pressure could persist, and that the February low near $438 may need to be tested before the stock finds support. Peer stocks were caught in the crossfire as well—CVS Health fell 8%, Elevance Health dropped 10%, and Humana plunged 16%.

The impact on the Dow Jones Industrial Average was immediate and significant. Given UNH's outsized weighting, the sharp move in its shares contributed heavily to a 612-point decline in Dow futures. While broader S& 500 futures were marginally higher on the day, the Dow was firmly in the red, highlighting how individual component shocks can distort index-level performance.

In summary, UnitedHealth's Q1 results and revised guidance disappointed on nearly every front, with utilization risk in Medicare Advantage driving a dramatic re-rating of the stock. While management laid out a hopeful path forward centered on 2026 reimbursement improvements and internal adjustments, Thursday's reaction underscored investor skepticism. Until those headwinds are better contained, UNH may remain under pressure, serving as both a bellwether and burden for the broader healthcare space and the Dow alike.