UnitedHealth Shares Slide as DOJ Criminal Probe Adds to Mounting Pressure

UnitedHealth Group (UNH) is once again under intense scrutiny after The Wall Street Journal reported that the Department of Justice’s criminal healthcare fraud unit is actively investigating the insurer for potential Medicare fraud. The probe, which reportedly began in mid-2024, centers on whether UnitedHealth improperly inflated risk scores through diagnosis coding in its Medicare Advantage business to collect higher reimbursements from the government. The DOJ’s focus on insurers—rather than providers—marks a notable expansion of its Medicare fraud enforcement strategy.

The alleged practices, if proven, could amount to billions of dollars in overpayments, making this investigation potentially far-reaching. Prosecutors are reportedly honing in on UnitedHealth’s Optum unit, which manages services including diagnosis coding. A DOJ win could spark industry-wide reforms in how Medicare Advantage payments are audited and administered.

UnitedHealth responded by saying it has not been contacted by the DOJ regarding any criminal probe and called the reports “inaccurate and biased.” Nonetheless, the market reaction has been swift and punishing. UNH shares plunged 6.6% in premarket trading Thursday and touched a fresh low of $283 in overnight trade—continuing a month-long collapse that has wiped out nearly 50% of the company’s market cap. As one of the largest components of the Dow Jones Industrial Average, the UNH selloff added significant downward pressure on the broader index Thursday morning.

The timing adds insult to injury. UnitedHealth has already been navigating a string of crises in 2025, including disappointing Q1 earnings, elevated medical cost ratios, a drastic guidance cut, the abrupt departure of CEO Andrew Witty, and now the removal of FY2025 guidance entirely. The leadership vacuum has only deepened investor anxiety, particularly with DOJ scrutiny escalating and the Trump administration vowing to crack down on Medicare Advantage overbilling.

However, some analysts and market watchers are starting to argue that the selloff may be overdone. At current levels, UNH trades at a steep discount to its historical valuation and to other managed care peers, with some bulls citing past DOJ probes—like those into Super Micro Computer and Nvidia—that led to short-term panic followed by swift rebounds once the dust settled. Moreover, UNH remains a dominant player in Medicare Advantage, which accounts for roughly 79% of its revenue. Even if regulators turn up the heat, a full dismantling of this segment is unlikely given the systemic disruption it would cause.

Barclays recently lowered its price target on UNH from $513 to $362, attempting to “stress test” the company’s 2025 EPS under adverse legal and policy outcomes. While this acknowledges the legal overhang, it also implies meaningful upside from current levels if the situation stabilizes. Similarly, some analysts note that the probe—although headline-grabbing—is still speculative, and no official charges or enforcement actions have been filed.

In the short term, volatility is likely to remain elevated, and the technical picture remains broken. But for long-term investors, the selloff may be creating a rare entry point into one of the healthcare sector’s largest and most profitable businesses—assuming the company can survive the political and legal storm intact.