UnitedHealth aims to reassure investors as profits plunge, DOJ investigates its Medicare business

Published On: July 29, 2025

UnitedHealth’s second-quarter earnings comes two and a half months since Chairman and CEO Stephen Hemsley retook the role of chief executive.
Investors will be watching for how Hemsley plans to stabilize the company’s embattled Medicare Advantage program and Optum Health physician practices.
The company pledged to provide new guidance on 2025 earnings with the release, after suspending its outlook in May following an abrupt change of leadership.

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Tuesday’s earnings release by UnitedHealth Group, the biggest private insurer in the United States, will be the first serious test of Stephen Hemsley’s ability to win back investor trust.

After earnings in its core Medicare program and Optum Health physician practices collapsed, the Dow component’s share price has been cut roughly in half since mid-May, putting the stock on track for its worst year in over a decade.Because of this, outgoing CEO Andrew Witty abruptly resigned, prompting the company to halt profits guidance and rehire former CEO Hemsley in his place. Additionally, the Department of Justice is looking investigating the company’s Medicare billing methods in both criminal and civil cases.

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UnitedHealth is in a “perfect storm,” according to analyst Ann Hynes of Mizuho Securities, as it deals with numerous issues. Hemsley assured investors in June that “we’re humbly determined to earn back your trust and your confidence,” but now they want to know how he intends to navigate the company out of the whirlwind.

Investors will be looking for the following three main items in the company’s earnings report.

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Analysts are more interested in UnitedHealth’s projections for the entire year than in the company’s second-quarter results. After the company halted its projection in May, Hemsley assured investors that it would give them an update on its 2025 earnings guidance.

According to LSEG’s average forecasts, analysts anticipate that UnitedHealth will report adjusted full-year earnings of $21.26 per share. From a low of $18 per share to a high of $26.44 per share, estimates vary.

“Anything below $18 that would be viewed as a negative by the street,” Hynes stated.

Although Ben Hendrix, an analyst at RBC Capital Markets, has raised his forecast above the average to $23.36, he stated that Wall Street is still pessimistic about UnitedHealth.

“While we base our more optimistic outlook on management’s assertion that Medicare Advantage remains profitable with the 3% low-end of target MA margin in sight for 2026, clients we’ve spoken to have expressed concern over continued margin compression in OptumHealth and accelerating (medical cost) trend in core Medicare Advantage,” he wrote in an earlier note this month.

The company’s initiatives to stabilize Optum Health, its medical practice division, are another area of interest for analysts. Through the use of its 90,000 employed or connected physicians to treat patients on UnitedHealth’s own plans, it enabled UnitedHealth outperform its competitors in its main Medicare Advantage program for years.

“Investors with duration were investing in United really for the power of Optum Health, the power of United steering their own Medicare Advantage members, extracting considerable margin that they hadn’t been able to before,” said Michael Ha, a Baird analyst.

However, Optum Health experienced a steep drop in earnings during the first quarter of this year. The decline, according to analysts, was partly caused by V28, a Biden-era modification to Medicare reimbursement guidelines that makes it more difficult for insurers and physicians to charge for additional services.

According to Hynes of Mizuho, previous billing coding regulations gave plans much greater leeway to include billing codes for chronic diseases like general cardiac problems, which would raise the risk score and reimbursement rate. The new V28 rule closes gaps that could increase reimbursement by making the billing codes more precise.

“V28 is very black and white, so you don’t have that kind of ability to add codes, and a lot of codes are removed,” she said. She added that this has now “led to a structural shift in margins for Optum Health.”

However, Ha pointed out that the V28 modifications started in 2024, when older people began using care more frequently. Over the past year, a number of UnitedHealth’s Medicare Advantage rivals have made changes to account for the change. UnitedHealth seems to have been taken off guard by Optum Health’s abrupt decline in margins during the first quarter.

“I believe it’s a case of poor execution. For whatever reason, they were unable to discover the offset, even though they were aware of the headwind well in advance of the year, according to Ha. “We’re still confident that Optum Health and United can recover and rebuild unit economics, but we think over the next one to two years, it may potentially worsen.”

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Prior to Thursday’s earnings release, the business acknowledged in an SEC filing that the Department of Justice is conducting criminal and civil investigations into its Medicare program billing practices.

The Wall Street Journal was the first to reveal that UnitedHealth was helping with the investigations. In March, a court-appointed special master found in favor of the corporation in a case involving similar DOJ charges from the first Trump administration, it added.

According to Hynes, investor anxiety over the DOJ investigations has been exaggerated.

“The stock is trading like the government’s going to kick them out of Medicare and Medicaid, and the likelihood of that is zero, in my view,” she stated. “It will probably end up with them writing a check and doing a Corporate Integrity Agreement that’s what has happened in the past.”

However, a wave of public outrage against the actions of health insurers was sparked by the shooting death of UnitedHealth CEO Brian Thompson in December, which prosecutors claim was committed by a shooter motivated by insurance denials.

The pressure on big insurers like UnitedHealth is probably not going to stop, according to former whistleblower Wendell Potter, who has blasted industry practices after working at Cigna. As Washington struggles with high health and medication expenses in Medicare, Medicaid, and other government health programs, regulatory scrutiny in Congress has intensified on both sides of the aisle.

Potter, president of the Center for Health and Democracy, stated, “Many members of Congress who are physicians or Republicans, some of whom are pharmacists, and they see firsthand the heavy hand of these companies.” “And so you’re seeing interest by Republicans, and I’ve not seen that before.”

In an attempt “to provide our stakeholders transparency and confidence” in the company’s business processes, UnitedHealth stated in June that it had engaged outside auditors to investigate the company’s procedures in pharmaceutical benefits services and health insurance.

During the second-quarter results call, the business informed CNBC that it would not have a lot of information to share regarding the audit. It anticipates that the review won’t be finished until the end of this year’s third quarter.