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UnitedHealth Group Chairman and CEO Stephen Hemsley will face the primary real test Tuesday of his ability to regain investor confidence as the biggest private U.S. insurer reports earnings.
The Dow component has seen its share price cut nearly in half since mid-May, with the stock on pace for its worst 12 months in greater than a decade, after earnings in its flagship Medicare program and Optum Health physician practices plummeted. That led to the abrupt resignation of former CEO Andrew Witty, forcing the corporate to reinstate ex-CEO Hemsley to interchange him and suspend earnings guidance. On top of that, the corporate is facing criminal and civil Department of Justice investigations into its Medicare billing practices. Â
As UnitedHealth faces challenges on multiple fronts, it sits in a “perfect storm,” said Mizuho Securities analyst Ann Hynes. Now, investors wish to understand how Hemsley plans to steer the corporate out of the whirlwind, after assuring them last June that “we’re humbly determined to earn back your trust and your confidence.”
Listed here are three key things investors can be on the lookout for from the corporate’s earnings report.
The massive number: 2025 guidance
More so than the second-quarter numbers, analysts are focused on UnitedHealth’s outlook for the total 12 months. Hemsley told investors the corporate would offer an update on 2025 earnings guidance, after it suspended its forecast in May.
Analysts expect UnitedHealth to post adjusted full-year earnings of $21.26 per share, based on consensus estimates from LSEG. Estimates range from a low of $18 per share to a peak of $26.44 a share.
“Anything below $18 — that will be viewed as a negative by the road,” Hynes said
RBC Capital Markets analyst Ben Hendrix has set his estimate above consensus at $23.36, but said Wall Street stays bearish on UnitedHealth.
“While we base our more optimistic outlook on management’s assertion that Medicare Advantage stays profitable with the three% low-end of goal MA margin in sight for 2026, clients we have spoken to have expressed concern over continued margin compression in OptumHealth and accelerating (medical cost) trend in core Medicare Advantage,” he wrote in a note earlier this month.
Medicare Advantage and Optum Health outlook
Analysts are also focused on how the corporate plans to stabilize its physician practice unit, Optum Health. For years, it helped UnitedHealth outperform its peers in its flagship Medicare Advantage program, by leveraging its 90,000 employed or affiliated doctors to treat patients on UnitedHealth’s own plans.
“Investors with duration were investing in United really for the ability of … Optum Health, the ability of United steering their very own Medicare Advantage members, extracting considerable margin that they hadn’t been in a position to before,” said Baird analyst Michael Ha.
But in the primary quarter this 12 months, Optum Health saw a pointy decline in profits. Analysts said the plunge was due partly to a Biden-era change in Medicare reimbursement standards often known as V28, which is making it harder for insurers and doctors to bill for extra services.
Mizuho’s Hynes said prior billing coding rules left so much more room for plans so as to add billing codes related to chronic conditions, reminiscent of overall heart conditions, which would offer the next risk rating and reimbursement rate. Under the brand new V28 rule the billing codes are more specific, closing loopholes that might boost reimbursement.
“V28 could be very black and white, so that you haven’t got that sort of ability so as to add codes, and lots of codes are removed,” she said, adding that has now “led to a structural shift in margins for Optum Health.”
But Ha noted the V28 changes began in 2024, at a time when seniors began utilizing more care. A lot of UnitedHealth’s Medicare Advantage competitors made adjustments over the past 12 months to handle the shift. The sudden collapse of Optum Health margins in the primary quarter appears to have caught UnitedHealth off guard.
“I believe it’s an example of misexecution. They knew the headwind heading into the 12 months and even well before then, but for one reason or one other couldn’t find the offset,” Ha said. “We’re still confident that Optum Health and United can recuperate and rebuild unit economics, but we expect over the subsequent one to 2 years, it might potentially worsen.”
Legal and regulatory issues
The corporate got out ahead of the earnings report on Thursday, acknowledging in an SEC filing that its Medicare program billing practices face criminal and civil probes by the Department of Justice.Â
UnitedHealth said the corporate is cooperating the with the investigations, first reported by the Wall Street Journal. It also noted that in March, a court-appointed special master ruled in the corporate’s favor in a case involving similar allegations brought by the DOJ through the first Trump administration.
Hynes believes investor concern over the DOJ probes has been overblown.
“The stock is trading like the federal government’s going to kick them out of Medicare and Medicaid, and the likelihood of that’s zero, in my opinion,” she said. “It should probably find yourself with them writing a check and doing a Corporate Integrity Agreement … that is what has happened previously.”
However the shooting death of UnitedHealth executive Brian Thompson last December, which prosecutors allege was carried out by a gunman who was motived by insurance denials, unleashed a groundswell of public criticism of health insurers’ practices.Â
Former whistleblower Wendell Potter, who has criticized industry practices after a profession at Cigna, said the pressure on large insurers like UnitedHealth likely is not going to stop. Regulatory scrutiny in Congress has increased on each side of the aisle, as Washington grapples with high health and drug costs in Medicare, Medicaid and other government health programs.
“Loads of the members of Congress who’re doctors or Republicans, some are pharmacists, they usually see firsthand the heavy hand of those corporations,” said Potter, president of the Center for Health and Democracy. “And so that you’re seeing interest by Republicans, and I’ve not seen that before.”
In June, UnitedHealth announced that it had hired third party auditors to conduct a review of the corporate’s practices in medical health insurance and pharmacy advantages services, in an effort “to supply our stakeholders transparency and confidence” in the corporate’s business practices.
The corporate told CNBC it is going to not have many details to supply about that audit through the second-quarter earnings call. It doesn’t expect the review to be accomplished until the top of the third quarter of this 12 months.
