UnitedHealth Group takes Wall Street hit because of investors' fears about Medicare Advantage profitability, Department of Justice antitrust investigation

STAT News today published an op-ed I coauthored with Dr. Philip Verhoef, president of Physicians for a National Health Program, making the point that investors are among the growing number of stakeholders who are souring on big, for-profit insurance companies like the ones I used to work for (Cigna and Humana). 

We focused specifically on investors' concerns about the continued profitability of Medicare Advantage plans most of the big insurers own and operate. Several companies have lost billions of dollars in market capitalization over the past several weeks as they have reported what they maintain is higher than usual utilization of health care goods and services by seniors enrolled in MA plans. 

Today, the companies–especially UnitedHealth Group, the market leader with 7.6 million Medicare Advantage enrollees–are losing billions more in market cap on the news, broke yesterday by the Wall Street Journal, that the Department of Justice is investigating UnitedHealth’s many acquisitions over the years. UnitedHealth and most of the other companies are no longer just insurance companies. They’ve moved rapidly into health care delivery by buying physician practices and clinics, and three of them, UnitedHealth, Cigna and CVS/Aetna, control 80% of the pharmacy benefit management business. 

As Phil and I wrote in our op-ed:

Investors in MA insurance companies experienced a rude awakening in late January, with insurer stocks plummeting in the face of earnings reports showing profits falling far below expectations in the last quarter of 2023. Companies like CVS Health and UnitedHealth Group saw losses of 5.2% and 6.2% respectively, while Humana, whose business model relies heavily on the MA program, fell an astonishing 14.2%. These insurers cited higher than average health care utilization rates as the culprit and warned that 2024 would likely see more of the same. At the same time, private equity investment in MA has fallen, showing waning confidence in the program. 

We went on to note that both Democrats and Republicans in Congress are increasingly concerned about MA insurers’ business practices and, among other things, have introduced bills to crack down on egregious overpayments to MA plans. 

The WSJ reported yesterday that the Justice Department has launched an antitrust investigation into UnitedHealth, which has become not only the country’s biggest U.S. health insurer but also a leading manager of drug benefits “and a sprawling network of doctor groups.”

The Journal’s Anna Wilde Mathews and Dave Michaels wrote that:

The investigators have in recent weeks been interviewing healthcare-industry representatives in sectors where UnitedHealth competes, including doctor groups, according to people with knowledge of the meetings.

The DOJ’s investigation of UnitedHealth is wide-ranging. Among other things, according to the Journal, “investigators have asked whether and how the tie-up between UnitedHealthcare [the insurance division] and Optum’s medical groups might affect its compliance with federal rules that cap how much a health-insurance company retains from the premiums it collects. (Optum is the company’s division that encompasses the pharmacy benefit manager Optum Rx and the many clinics and physician practices it owns.)

HEALTH CARE un-covered explained last month how UnitedHealth essentially is paying itself billions of dollars every month and circumventing the intent of a federal law that requires insurers to spend at least 80% of premium dollars on their health plan enrollees’ health care.

I know from sources within the Justice Department that investigators saw that piece, as well as the comprehensive analysis we published earlier of the scores of acquisitions UnitedHealth has made in recent years that have enabled it to catapult to the top five of the Fortune 500 list of American companies. 

Those sources told me that the DOJ is very concerned about the consolidation within both the health insurance business and the hospital industry. Many U.S. hospitals, in an ongoing effort to negotiate from an enhanced position of strength with UnitedHealth and the other vertically integrated insurers, have merged with each other in recent years and become part of huge health-care delivery systems.

At the close of trading on the New York Stock Exchange yesterday, shares of UnitedHealth Group’s share were down $11.90 or 2.27%. Investors are continuing to head for the exits today. As I write this, the company’s stock price has fallen another $20 (4%) to $494.00. That’s way down from the company’s 52-week high of $554.70.

Shares of most of the other big publicly traded insurers (Centene, Cigna, CVS/Aetna, Elevance, Humana and Molina) are also down, ranging from $.83 at CVS to $11.51 at Humana.