UnitedHealth Group’s stock (UNH) has hit a rough patch, weighed down by regulatory pressure on its Medicare Advantage programs and rising medical costs. But stepping back from the current turbulence, there’s reason for cautious optimism. UnitedHealth’s strategic direction and diversified business model leave it well-positioned to benefit from long-term healthcare trends, even as it navigates short-term headwinds. All things considered, I remain cautiously bullish on UNH.
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Medicare Advantage Probes and Regulatory Scrutiny
UnitedHealth is facing challenges on multiple fronts. Most notably, the Department of Justice (DOJ) is investigating potential fraud in its largest revenue source, the Medicare Advantage (MA) business. This follows a civil inquiry into whether the company exaggerated patient diagnoses to secure higher payments for its MA plans, a serious allegation. UnitedHealth has denied any knowledge of a criminal investigation, so for now, that aspect remains speculative.
These concerns come as the Centers for Medicare & Medicaid Services (CMS) plans to audit all Medicare Advantage programs, placing additional scrutiny on UnitedHealth. Given that the MA business is a critical part of UnitedHealthcare—one of the company’s two core segments alongside Optum—this spotlight could have meaningful implications.
In its first quarter 2025 earnings, UnitedHealthcare’s revenues were $84.6 billion out of total revenues of $109.6 billion. As of Q1 2025, UnitedHealthcare had 8.2 million MA members, making up nearly 20% of the total domestic membership.
Higher Medical Costs and Revised Outlook
In addition to mounting regulatory pressure, UnitedHealth’s Medicare Advantage (MA) business is being squeezed by rising medical costs. An aging population is driving higher-than-expected utilization of healthcare services, while government reimbursement rates are slow to keep pace. For example, the planned 5.06% increase in reimbursement for 2026, though helpful, is unlikely to fully offset the surge in expenses, leaving MA providers like UnitedHealth in a difficult position. These cost pressures have already forced the company to lower its full-year 2025 earnings guidance.
Compounding the situation are the lingering effects of the February 2024 ransomware attack on its Change Healthcare subsidiary, which exposed sensitive data of millions of patients. On top of that, the company is still reeling from the tragic assassination of former CEO Brian Thompson last December, adding further disruption during an already turbulent period.
Why a UNH Stock Bounce is Possible
For investors, turbulent periods like this echo Warren Buffett’s famous advice: “Be fearful when others are greedy, and greedy when others are fearful.” UnitedHealth’s newly reappointed CEO, Stephen J. Hemsley, is well-suited to lead through uncertainty, having already steered the company through the 2008 financial crisis during his previous tenure from 2006 to 2017.
Importantly, UnitedHealth’s business model is both defensive and diversified, extending well beyond its Medicare Advantage operations. Its Optum segment, which includes health services, pharmacy benefits management, and healthcare technology, is a major growth driver. In the first quarter alone, Optum’s revenue rose by $2.8 billion to $63.9 billion.
Optum’s success also reinforces the MA business through its focus on value-based care, creating a potential flywheel effect that enhances overall efficiency and patient outcomes. And with powerful long-term tailwinds in the healthcare sector, particularly from an aging population, UnitedHealth—as the largest MA provider—remains well-positioned for future growth.
Is UnitedHealth Stock a Good Buy?
On Wall Street, UNH sports a Moderate Buy consensus rating based on 19 Buy, six Hold, and one Sell ratings in the past three months. UNH’s average price target of $380.59 implies a 28% upside potential over the next 12 months.
Given the factors surrounding the stock, UNH has been subject to many rating downgrades this past month.
For instance, HSBC analyst Sidharth Sahoo downgraded UNH to Sell due to several risks, including “potential increases in the medical loss ratio, policy risks related to Optum Rx, and lower return on equity expectations. Additionally, the cancellation of 2025 earnings guidance has increased the downside risk for future earnings, and potential Medicaid funding cuts could further impact the company’s financial performance.”
Not all analysts share Sahoo’s cautious outlook. JPMorgan’s Lisa Gill maintains a Buy rating on UnitedHealth, viewing the recent stock decline as “overdone.” She contends that The Guardian‘s report, which contributed to market volatility, misrepresents how UnitedHealth manages hospitalizations. In her view, the misconduct allegations don’t hold up under scrutiny.
Gill essentially dismisses the report’s claims, emphasizing a logical rationale behind UnitedHealthcare incentivizing nursing facilities to reduce unnecessary hospitalizations, since it can lead to better outcomes and lower costs for all parties. That said, such programs must be implemented with care and integrity. Ethically, once a hospital transfer becomes medically necessary—say, in the case of stroke symptoms—it should never be delayed or denied.
In response to the article, UnitedHealth issued a statement asserting that the Department of Justice had previously reviewed the matter and chose not to take further action.
UNH Navigates Short-Term Challenges with Long-Term Resilience
In summary, UnitedHealth’s recent volatility could present a compelling opportunity for investors willing to ride out the turbulence. The company is clearly facing a tough stretch, with heightened regulatory scrutiny, rising medical costs, and the lasting impact of the Change Healthcare cyberattack creating significant near-term headwinds.
However, looking beyond the immediate challenges, UnitedHealth’s relatively conservative valuation and well-diversified business model provide a strong platform for long-term recovery. The road ahead may be uneven, but the company appears well-positioned to navigate the storm and emerge stronger on the other side.