UnitedHealth vs. Elevance: Which Medicare Play Has the Edge?

The Medicare Advantage (MA) market is booming, but not all players are created equal. With enrollment hitting 34.6 million in early 2025—a 3.8% year-over-year increase—the sector is maturing, and insurers are grappling with slowing growth, rising costs, and shifting regulations. For investors, the question is clear: Does UnitedHealth (UNH), the industry giant with 28.7% market share, or Elevance Health (ELV), the aggressive upstart growing at 11.8%, offer superior upside? Let's dissect their strategies, financials, and valuations to find out.

Market Positioning: Scale vs. Agility

UnitedHealth dominates the MA landscape, leveraging its Optum infrastructure and AARP partnerships to amass 9.9 million MA members as of March 2025. Its 28.7% market share cements its leadership, but this comes with growing pains. The insurer is shedding unprofitable plans and focusing on Health Maintenance Organization (HMO) products to control costs. However, its Q1 2025 operating income dipped due to elevated utilization and CMS reimbursement challenges, with CEO Andrew Witty stepping down amid a criminal investigation into Medicare fraud allegations.

Elevance, by contrast, is fourth in MA enrollment with 2.0 million members but is closing the gap fast. Its 11.8% MA growth rate (vs. UnitedHealth's 4%) stems from strategic acquisitions (e.g., Cigna's MA business) and a focus on high-margin segments like Dual Special Needs Plans (DSNPs). The company's Carelon division—its pharmacy and home health arm—delivered a 38% revenue surge in Q1 2025, proving its value-based care (VBC) model can drive top-line growth without sacrificing margins.

Growth Potential: Where Are the Opportunities?

• UnitedHealth: Faces a ceiling. While its scale allows it to negotiate favorable rates, its 4% MA growth in 2025 lags peers. The insurer is also battling a 15% drop in Optum Health's operating income due to CMS's new risk-adjustment model, which underpaid for newly enrolled members. Its Q1 medical loss ratio (MLR) hit 84.8%, with a projected 87.5% for 2025—signaling margin erosion.

• Elevance: Betting on innovation. Its CarelonRx and integrated care services are reducing hospitalizations and improving Star Ratings (a key enrollment driver). Elevance's HMO-focused strategy and 86.4% MLR (driven by Medicaid, not Medicare) show discipline. It's also capitalizing on market exits by rivals like Humana and CVS, snatching contracts in high-potential regions like California and Texas.

Value-Based Care: Who's Winning the Long Game?

Both insurers are pivoting to VBC, but execution differs. UnitedHealth's OptumRx and Carelon's pharmacy/home health offerings are direct competitors, but Elevance's Carelon division is outpacing peers with 10.9% operating expense efficiency—a stark contrast to UnitedHealth's 12.4%. Elevance's VBC plays, such as its $0 premium plans and Part B premium buydowns, are attracting price-sensitive enrollees, while UnitedHealth's focus on AARP-branded products risks commoditization.

Valuation: P/E Ratios and Earnings Trajectories

• UnitedHealth: Trades at a 11.76x forward P/E, reflecting investor skepticism. Its Q1 EPS miss and 15.5% 2025 EPS downgrade (to $26–$26.50 from $29.50–$30) underscore risks. With a 42.7% debt-to-capital ratio and a 41.4% YTD stock drop, UNH looks overvalued for its challenges.

• Elevance: Offers a 10.60x P/E—a bargain. Its Q1 EPS of $8.74 beat estimates, and it maintained its $34.15–$34.85 2025 guidance despite headwinds. With a 39.7% debt-to-capital ratio and 4.2% YTD stock growth, ELV is cheaper and more resilient.

Risk Factors: What Could Go Wrong?

• UnitedHealth: Regulatory scrutiny (e.g., DOJ probes), leadership instability, and reliance on Optum's inconsistent performance. Its 87.5% MLR forecast hints at margin sensitivity to cost inflation.
• Elevance: Medicaid membership declines (down 3.3% in Q1) and execution risks in scaling Carelon's integrated services. However, its diversified revenue streams and prudent growth targets mitigate these risks.

Verdict: Elevance's Edge in Risk-Adjusted Returns

While UnitedHealth's scale and Optum's ecosystem provide a moat, its near-term challenges—margin pressures, governance issues, and overvaluation—limit upside. Elevance, meanwhile, combines strong MA growth, disciplined cost controls, and a VBC engine (Carelon) that's driving 38% segment revenue growth. Its lower valuation and reaffirmed guidance make it the better risk-reward bet in a consolidating MA market.

Action Item: Investors seeking MA exposure should overweight Elevance (ELV) for its growth trajectory and valuation. UnitedHealth (UNH) is a “wait for a rebound” story—avoid until its margin and leadership issues stabilize.

The Medicare Advantage game is about more than size—it's about adaptability. Right now, Elevance is winning that race.