Before Buying UNH Dip: Here's What You Should Know
UnitedHealth Group faced another setback amid ongoing negative news. On May 21, before the market opened, The Guardian reported that UNH secretly paid bonuses to nursing homes to reduce hospital referrals and help attract more Medicare enrollees. The stock fell as much as 7% in pre-market trading.
This month, amid a series of negative events, UnitedHealth's stock price plummeted from its April high of $606 to a low of $248, before rebounding to $321.58 at Tuesday's close.
From a long-term perspective, the U.S. health insurance sector had been a veritable "bull market haven": In the 15 years from 2010 to 2025, UNH had surged by 2400% before its recent decline. Other companies in the sector also saw significant gains, with MOH up over 1700%, and both CNC and CI rising more than 1000%.
However, given the current intense market repricing, rushing in with a large position seems risky. A more prudent approach might be to start with a small position and wait for risks to fully play out before increasing exposure. Before buying the dip, it's wise to reassess UNH's fundamentals to better gauge the extent of risk mitigation.
1. Largest Health Insurer in the U.S., Successful "Vertical Integration" Model
Despite historically being viewed as an insurance company, UNH's revenue is now relatively balanced between insurance and non-insurance operations. After years of business development, acquisitions, and adjustments, UNH has established two main business lines:
Insurance: UnitedHealthcare provides medical insurance to four main customer segments: "Employer & Individual," "Medicare & Retirement," "Community & State Medicaid," and "Global." This core business accounts for about 57% of the company's revenue. Although UNH is the largest health insurer in the U.S., its market share is only around 15%, with the top five companies holding 57% of the market, indicating a relatively fragmented industry.
Health Services: Optum, UNH's healthcare services platform, is divided into three units:
1. OptumHealth: Medical services division
2. OptumRx: Third-largest pharmacy benefit manager in the U.S.
3. OptumInsight: Offers consulting and technology services, including Change Healthcare
Among these, OptumRx is the largest revenue contributor, accounting for about 34% of the group's total revenue.
2. Backlash After Excessive Profit-Seeking, Negative Events Ongoing
– Executive Attack and Public Trust Crisis
On December 4, 2024, Brian Thompson, CEO of UnitedHealthcare, a subsidiary of UnitedHealth Group, was fatally shot in a targeted attack in Manhattan, New York. This incident sparked public outrage over UnitedHealth's high claim denial rates (UNH's denial rate of 32% is twice the industry average).
On December 4, 2024, Brian Thompson, CEO of UnitedHealthcare, a subsidiary of UnitedHealth Group, was fatally shot in a targeted attack in Manhattan, New York. This incident sparked public outrage over UnitedHealth's high claim denial rates (UNH's denial rate of 32% is twice the industry average).
– Pressure from Healthcare Policy Adjustments
On April 23, 2025, the Trump administration signed an executive order mandating prescription drug prices be reduced to the "global lowest price" (estimated reductions of 30%-80%). This directly impacts UnitedHealth's pharmacy benefit management business, OptumRx (accounting for 14% of the group's operating profit). If implemented, this policy could significantly compress OptumRx's profit margins, affecting overall profitability.
On April 23, 2025, the Trump administration signed an executive order mandating prescription drug prices be reduced to the "global lowest price" (estimated reductions of 30%-80%). This directly impacts UnitedHealth's pharmacy benefit management business, OptumRx (accounting for 14% of the group's operating profit). If implemented, this policy could significantly compress OptumRx's profit margins, affecting overall profitability.
– Soaring Medical Costs, Management Turmoil, and Suspended 2025 Guidance
On April 17, the company reported in its Q1 earnings that Medicare Advantage patient outpatient visits had doubled and health conditions had become more complex, causing medical expenses to far exceed expectations. This led to a surge in net profit but actual profits below market expectations. Consequently, the company lowered its 2025 performance guidance.
On April 17, the company reported in its Q1 earnings that Medicare Advantage patient outpatient visits had doubled and health conditions had become more complex, causing medical expenses to far exceed expectations. This led to a surge in net profit but actual profits below market expectations. Consequently, the company lowered its 2025 performance guidance.
On May 13, the company announced the sudden resignation of CEO Andrew Witty. Chairman Stephen Hemsley (72) was appointed as the new CEO. Despite his extensive experience, this leadership change during a strategic adjustment period could exacerbate internal instability. Moreover, Hemsley's substantial equity incentive ($60 million) has sparked controversy.
Simultaneously, the company suspended the guidance it had lowered just a month prior, citing higher-than-expected expenses.
– Escalation of DOJ Criminal Investigation
On May 15, The Wall Street Journal revealed that the U.S. Department of Justice (DOJ) had launched a criminal investigation into UnitedHealth, focusing on alleged inflation of patient risk scores in its Medicare Advantage plans to fraudulently obtain federal subsidies (suspected illegal gains of $8.7 billion in 2021 alone). If proven, the company could face billions in fines and suspension from federal healthcare programs.
On May 15, The Wall Street Journal revealed that the U.S. Department of Justice (DOJ) had launched a criminal investigation into UnitedHealth, focusing on alleged inflation of patient risk scores in its Medicare Advantage plans to fraudulently obtain federal subsidies (suspected illegal gains of $8.7 billion in 2021 alone). If proven, the company could face billions in fines and suspension from federal healthcare programs.
– Alleged Secret Payments to Nursing Homes
On May 21, a Guardian investigation claimed that the healthcare giant secretly paid bonuses to nursing homes to reduce hospital referrals and help it gain more Medicare enrollees. "The company's intervention altered nursing homes' emergency response procedures, leading to delayed or avoided hospital transfers for patients who should have been immediately referred for hospital care."
On May 21, a Guardian investigation claimed that the healthcare giant secretly paid bonuses to nursing homes to reduce hospital referrals and help it gain more Medicare enrollees. "The company's intervention altered nursing homes' emergency response procedures, leading to delayed or avoided hospital transfers for patients who should have been immediately referred for hospital care."
3. Increasing Number of Analysts Losing Confidence
Deutsche Bank compared UNH to General Electric (GE) in a May 13 report, noting similarities in their rapid expansion and subsequent challenges. UNH's aggressive growth in health insurance and value-based care has led to three consecutive years of lowered earnings forecasts. Analysts suggest it may take years for UNH to regain a premium valuation. Despite maintaining a "Buy" rating, Deutsche Bank significantly lowered its price target to $362.
On May 19, TD Cowen downgraded UNH from "Buy" to "Hold" and reduced its price target from $520 to $308. Analyst Ryan Langston cited ongoing pressures from Medicare Advantage model changes and other challenges, including CEO Andrew Witty's resignation and a reported DOJ investigation.
HSBC downgraded UNH to "Sell" on May 21, slashing its price target to $270. Analyst Sahoo warned of continued risks, including rising medical costs and drug pricing pressures. Despite the stock's low P/E ratio, HSBC expects further deterioration in fundamentals and emphasized UNH's need to rebuild investor confidence.
4. Accumulation of Positive Signals, Maintain Patience
In mid-May, UnitedHealth's management began significant insider buying, with the CEO and CFO purchasing $25 million and $5 million worth of shares, respectively. Such insider activity often serves as a leading indicator.
Simultaneously, the options market showed optimism, with open interest rising and the put/call ratio falling to a two-year low.
Long-term, U.S. aging demographics and UNH's strong competitive moat suggest potential for market share growth. However, current strategy should balance "oversold valuation" against "policy uncertainties."
For the short term, a defensive approach is advisable (strict position control and hedging). In the medium to long term, investors might consider gradually building positions as risks subside.
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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Coach Donnie : The situation is similar to that of SMCI at that time, dropped to $18, and then what happened?
topcing : that was my job.. you cant fill hospitals woth elderly that are fine passing away at tbeir leisure.. we would need more hospitals and more budget than d.o.d. . They pay professionals to carw without hospitalization. I know I was a caregiver
Detachment-Delta topcing : Instantly, UNH doesn't seem so evil anymore.
105098249 : When UnitedHealth is eager to state that "funding support is to improve Medical quality", the public is instead more inclined to ask: If it is truly for the good of the elderly, why is there still a need to use bonuses to "guide" decision-making? "Reducing unnecessary hospitalizations" sounds grand, yet it cannot hide the financial intervention in hospitalization standards behind it. This is not clarification, but a clear indication of something being amiss.
AllyAki : insightful
104231039 Jeff : Very helpful and informative
74128907 :![[undefined]](https://static.moomoo.com/nnq/emoji/static/image/default/default-black.png?imageMogr2/thumbnail/36x36 "undefined")
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老巴家的猫 : In my opinion, UNH is like JPM in the Banking Industry, an unshakeable Medical insurance company with annual revenue of 100 billion. Its total market value is currently less than 300 billion. A large amount of negative news has emerged in a short period, clearly indicating that it is being deliberately shorted. Do not be manipulated by malicious news.
遒特 : I think it is the time to buy low, every growing company will encounter temporary crises.
102147305瓶 : So much negative energy, it's really disheartening.
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