The healthcare giant UnitedHealth is experiencing a dramatic market downturn that has captured the attention of seasoned investors. While the S&P 500 has gained over 15% this year, UnitedHealth shares have plummeted by nearly 35%, marking seven consecutive trading sessions of declines. Even more concerning is that superior quarterly earnings failed to halt the stock’s freefall. What’s driving this unprecedented weakness in one of the world’s largest healthcare corporations, and how much further could it drop?
Investor Confidence Shaken by High-Profile Exit
Market sentiment received a significant blow when Michael Burry, the legendary investor who predicted the 2008 financial crisis, completely exited his position in UnitedHealth. This move came at a time when the stock was trading near historic valuation lows, raising questions about whether institutional investors are losing confidence in the company’s near-term recovery prospects.
Medical Cost Ratio Reveals Deepening Profitability Crisis
At the heart of UnitedHealth’s challenges lies a critical metric that signals deteriorating profitability: the Medical Care Ratio (MCR). This key indicator measures the percentage of premium revenue spent on medical claims, and the trend has turned alarming:
- 2023: 83.2%
- 2024: 85.5%
- Q3 2025: 89.9%
As this ratio climbs, less revenue remains for the company’s operations and profits. The Medicare Advantage segment has been particularly hard hit, with costs surging 7.5%—well above historical averages. Medicare Supplement products are experiencing even more dramatic cost increases exceeding 11%. Meanwhile, the value-based care business is operating at margins below 1%, significantly underperforming the target of 5%.
Strong Earnings Fail to Impress Market
The company’s third-quarter 2025 results theoretically should have provided relief. UnitedHealth exceeded profit expectations with adjusted earnings per share of $2.92, beating forecasts by 6.2%. Revenue climbed 12% to $113.2 billion.
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However, investors responded negatively. The market reaction reflected concerns that revenues slightly missed expectations and, more importantly, that the company’s structural issues remained unresolved. Operating cash flow stood at $5.9 billion, while the MCR of 89.9% significantly exceeded the twelve-month average of 85.2%.
Strategic Shift Brings Membership Declines
UnitedHealth has implemented what amounts to an emergency brake—with substantial consequences. For 2026, the company anticipates substantial membership reductions across key segments:
- Medicare Advantage: Approximately 1 million member decline
- Affordable Care Act: Enrollment expected to drop by around 67%
- Optum Health: Nearly 10% reduction in value-based care members
These measures form part of a comprehensive strategic realignment. Management aims to protect margins through plan adjustments and benefit reductions. The company doesn’t anticipate normalized commercial margins of 7-9% until 2027, while Medicare Advantage is targeting the upper half of the 2-4% goal range.
Analyst Outlook Remains Cautiously Optimistic
Despite the challenges, professional analysts maintain a generally positive stance. Among 26 covering analysts, 15 recommend “Strong Buy,” two suggest “Moderate Buy,” and eight advise “Hold.” Only one analyst recommends selling. The average price target sits at $387.73, substantially above current trading levels. However, the stock already trades at a forward P/E ratio of 18.98, exceeding the industry average of 15.29.
Company leadership has demonstrated resolve by raising their full-year 2025 guidance to at least $14.90 per share, with an adjusted projection of $16.25. The debt-to-capital ratio remains solid at 44.1%, and share repurchases are scheduled to resume in the second half of 2026. UnitedHealth does anticipate Medicare Advantage cost increases of approximately 10% in 2026, indicating that relief from cost pressures remains distant.
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