UnitedHealth's Outperformance Amid Berkshire's Mixed Bet on Health Insurance

The health insurance sector in the United States has long been a battleground for innovation, regulatory scrutiny, and capital allocation. Two titans—UnitedHealth Group and Berkshire Hathaway—have taken divergent approaches to navigating this complex landscape. While UnitedHealth has leveraged its scale and operational precision to dominate Medicare Advantage (MA) and drive robust financial performance, Berkshire's broader insurance strategy remains opaque, particularly in health-specific ventures. This divergence in strategic positioning and risk-reward dynamics explains UnitedHealth's recent outperformance and raises questions about Berkshire's long-term bets in the sector.

UnitedHealth: Precision, Scale, and Reward

UnitedHealth Group's 2024 financials underscore its dominance in healthcare. With revenue of $400.3 billion, operating income of $32.29 billion, and net income of $15.24 billion, the company has capitalized on its dual-engine model: UnitedHealthcare for insurance and Optum for services like pharmacy, data analytics, and provider networksUnitedHealth Group - Wikipedia^[1]. Its MA business, in particular, has been a growth engine. By securing 78% of its MA enrollees in 4-star or higher plans—eligible for federal bonus payments of $12.7 billion in 2025—UnitedHealth has positioned itself to capture a disproportionate share of government healthcare spendingUnitedHealth Group - Wikipedia^[1].

This success stems from strategic investments in data-driven care management and partnerships with providers to improve health outcomes, a critical factor in securing high star ratings. UnitedHealth's scale—nearly 380,000 employees and 50 million insured individuals in the U.S.—also allows it to absorb regulatory costs and negotiate favorable reimbursement ratesUnitedHealth Group - Wikipedia^[1]. However, its reliance on MA exposes it to political risks, such as potential reforms to Medicare Advantage or shifts in federal payment policies.

Berkshire Hathaway: Diversification and Uncertainty

Berkshire Hathaway's 2024 financials are staggering: $371.4 billion in revenue and $88.99 billion in net incomeBerkshire Hathaway Inc. - Wikipedia^[2]. Yet, its health insurance ventures remain a minor part of its sprawling portfolio. Unlike UnitedHealth, Berkshire has not disclosed specific strategies for health insurance in 2024–2025, focusing instead on its broader insurance operations, including property-casualty and reinsurance. This lack of granularity makes it difficult to assess its health-specific risks or opportunities.

Berkshire's insurance segment, while profitable, faces inherent volatility. Catastrophe claims and inflationary pressures could erode margins, particularly in property-casualty linesBerkshire Hathaway Inc. - Wikipedia^[2]. Its health insurance bets, if any, likely rely on its signature approach: leveraging insurance float—capital from premiums—to fund long-term investments rather than competing directly in healthcare delivery. This strategy prioritizes capital preservation over high-growth ventures, a stark contrast to UnitedHealth's aggressive expansion.

Risk-Reward Dynamics: A Tale of Two Models

UnitedHealth's model is high-reward, high-risk. Its focus on MA and vertical integration creates recurring revenue streams but ties its fortunes to government policy and healthcare cost inflation. Berkshire's diversified approach, meanwhile, spreads risk across industries but lacks the operational specificity to capitalize on health insurance's growth opportunities. For investors, the choice hinges on risk tolerance: UnitedHealth offers outsized returns in a regulated sector, while Berkshire provides stability at the expense of growth.

Conclusion

UnitedHealth's outperformance reflects its ability to align with secular trends in healthcare, particularly the shift toward value-based care and government-driven insurance expansion. Berkshire, by contrast, remains a master of capital allocation but has yet to articulate a compelling narrative for health insurance in an era of rapid industry consolidation. As the sector evolves, investors will need to weigh the precision of UnitedHealth's bets against the ambiguity of Berkshire's diversified approach.