UnitedHealth downgrades earnings outlook as CEO exits
UnitedHealth Group executives took the unusual step Tuesday of downgrading earnings guidance issued less than four weeks ago.
The health insurer announced that CEO Andrew Witty is stepping aside in favor of former CEO Stephen Hemsley, who led UHG for more than a decade before assuming a board role in August 2017. Hemsley and Chief Financial Officer John Rex held an unscheduled 20-minute call with investors and Wall Street analysts to explain the alarming financial trends.
“I’m deeply disappointed in and apologize for the performance setbacks we have encountered with from both external and internal challenges,” Hemsley said. “I am optimistic about our future as these issues are within our capacity to resolve. We will approach them with humility, rigor and urgency, as we have done over the years.”
UHG suspended its 2025 outlook as “care activity continued to accelerate while also broadening to more types of benefit offerings than seen in the first quarter, and the medical costs of many Medicare Advantage beneficiaries new to UnitedHealthcare remained higher than expected,” the insurer said in a news release.
UHG shares fell more than 15% as of mid-morning Tuesday. The insurer said it expects to return to growth in 2026.
‘Broadening of this higher trend’
Rex outlined “three buckets” the higher costs fall into:
- A greater-than-expected impact on United Healthcare from the health status of new members.
- Further acceleration of utilization within Medicare Advantage.
- Finally, “indications of a broadening of this higher trend to other areas.” In response to a question, Rex said the higher utilization of services is being seen in patients “with complex medical conditions” and is mainly “in the outpatient and physician side.”
“We are prudently anticipating these trends may go even further,” Rex explained. “These factors are driving care activity levels that continue to exceed our expectations.”
UHG will incorporate the “higher cost experiences and expectations” into its 2026 Medicare Advantage bids that are due soon, as well as its pricing in other markets, Rex said.
Following UHG’s April 17 release of disappointing first-quarter financials, UHG’s first earnings miss since 2008, Witty outlined a five-part plan to return the insurer to profitability.
But the stock price continued to steadily fall in the weeks since, from $454 after an initial fall on April 17 to $379 on Monday.
On April 29, UHG shook up Optum Health, replacing CEO Heather Cianfrocco with Dr. Patrick Conway, who had been Optum Rx CEO.
The tumultuous financial report and abrupt CEO switch are just the latest setbacks for UHG. The insurer’s streak of bad news began in February 2024, when Change Healthcare, a UHG subsidiary, was hit with a massive cyberattack. UHG is still dealing with the costly breach, which results in several lawsuits against Change, Optum Health, and UHG.
A disgruntled Luigi Mangione murdered UnitedHealthcare CEO Brian Thompson on Dec. 4. The attack took place outside the New York Hilton Midtown, where UnitedHealth Group was hosting an investor event.
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