UnitedHealth Group shares plunged over 20% on Thursday—the company’s worst single-day performance since 1998—after it slashed its annual profit forecast and revealed unexpectedly high medical costs in its Medicare Advantage business. The results have sent ripples across the broader health insurance sector, prompting concerns about rising costs and the outlook for rival insurers.
The insurer, widely viewed as a bellwether for the health insurance industry, revised its adjusted full-year earnings forecast down to between US$26 and US$26.50 per share, from a previous estimate of US$29.50 to US$30. The downgrade follows a spike in care utilisation, especially among seniors in privately managed Medicare plans.
“We did not perform up to our expectations,” UnitedHealth CEO Andrew Witty told analysts on an earnings call. “Our overall performance was frankly unusual and unacceptable.”
Sharp rise in senior care costs
UnitedHealth’s Medicare Advantage business—its largest growth engine—was hit hardest. The company said care activity in the first quarter increased at twice the expected rate, particularly in outpatient and physician services, as more seniors sought delayed treatments such as joint and hip replacements following the Covid-19 pandemic.
“Within UnitedHealthcare, pressure was largely contained within the senior business,” CFO John Rex explained. “We saw a sharp increase in care activities that became apparent as we closed out the quarter.”
This surge in utilisation pushed UnitedHealth’s medical care ratio—the percentage of premium revenue spent on care—from 85.5% in 2023 to an expected 87.5% in 2025.
Fallout across the industry
The shock results triggered a broad sell-off across the health insurance sector. Shares of Humana fell over 8%, CVS Health declined by about 6%, and Elevance Health dropped more than 1%. Cigna, which does not operate in the Medicare Advantage space, bucked the trend and rose slightly.
Analysts warned that UnitedHealth’s results may portend broader trouble.
“These results reveal ominous signs of accelerating medical costs,” wrote TD Cowen analyst Ryan Langston, noting that UnitedHealth had already flagged this trend in 2023. “This will call into question the full-year outlooks for every insurer.”
Barclays analyst Andrew Mok suggested that the fallout may be mitigated for companies like Humana and CVS, which recently exited unprofitable Medicare Advantage markets. But insurers that gained market share in that space—such as Elevance Health and Alignment Health—could face steeper challenges.
Structural and reputational headwinds
Bernstein analyst Lance Wilkes suggested that UnitedHealth may be easing back on prior authorisation requirements and other utilisation controls, potentially in response to heightened scrutiny following the murder of UnitedHealthcare’s CEO Brian Thompson and ongoing Department of Justice investigations into its Medicare billing practices.
“I think it’s probably United pulling back because of the policy headwinds and scrutiny on the company,” Wilkes said.
Additionally, UnitedHealth reported challenges with the Optum Health segment, which includes its pharmacy benefit manager and clinical services. The company said it had inherited sicker-than-expected patients from plans that exited Medicare Advantage markets in 2025, leading to lower-than-anticipated reimbursement levels.
“They experienced a surprising lack of engagement last year, which led to 2025 reimbursement levels well below what we would expect,” Witty said.
Relief on the horizon?
Despite the rocky quarter, UnitedHealth expressed confidence in addressing the cost pressures. Witty described the challenges as “highly addressable” and said the company is now focusing on closely monitoring high-risk patients and improving engagement in value-based care programs.
Insurers are also set to receive a significant boost in 2026, after the Trump administration in April approved a 5.06% increase in Medicare Advantage reimbursement rates—more than double the Biden administration’s earlier proposal. Analysts estimate the increase will raise an additional US$25bn in revenue for Medicare Advantage providers.
UnitedHealth reported US$6.47bn in net income for the quarter on US$109.6bn in revenue, narrowly missing revenue expectations. Its stock closed at just over US$453, down more than 22% on the day, and now sits about 10% below its value a year ago.
“While we are decidedly unsatisfied with these results,” Witty concluded, “our growth and foundation for improvement remains solid.”