Right. UnitedHealth. It’s been a…year. Honestly, it felt like watching a very expensive, slightly wobbly Jenga tower. One little wobble in the medical cost figures, and suddenly everyone was panicking. They cut earnings guidance, then withdrew it entirely. A 45% drop in the stock price. It was all a bit much, wasn’t it?
And then, Stephen Hemsley reappeared. Like a slightly exasperated parent returning to clean up a mess. He was the architect of their whole vertical integration thing, apparently. Which sounds…complicated. But the idea is, they own everything – the insurance, the care delivery, even the pharmacies. It’s supposed to be a moat. A very expensive, heavily guarded moat.
Units of optimism lost: numerous. Hours spent refreshing stock charts: far too many. Number of times I considered selling everything and becoming a goat farmer: surprisingly high.
They’re now trying to fix things by…raising prices. Which, let’s be honest, is rarely a popular strategy. They’re basically saying, “Look, things cost more, so you have to pay more.” It’s a bit like asking your friends to contribute to your expensive shoe habit. It might work, but you’ll probably lose a few friends along the way.
Rehabilitating the Risk-Based Business (Or Trying To)
Apparently, the whole thing started because claims unexpectedly spiked. A first earnings miss since 2008! One shudders to think. Then the guidance withdrawal. It was all rather dramatic. Now they’re promising conservative guidance and hoping for the best. The medical care ratio (MCR) jumped to nearly 90%. Which, I’m told, is bad. Very bad. It needs to come down to 85%, apparently. One can only hope.
Net margins plummeted. From 6% to 2.1%. It’s enough to make one reach for the gin. They’re repricing everything – Medicare Advantage, individual plans, commercial risk-based plans. It’s a brave move, but it could backfire. Membership losses are already happening. They’re prioritizing profit margins over growth. Which, as a long-term investor (in theory), I should applaud. But it feels a bit…cold, doesn’t it?
Early signs are…encouraging. They’re seeing renewal rates and pricing discipline. Which is good. But it’s still early days. We’ll get a better idea on January 27th. Until then, I’ll be nervously checking the stock price every five minutes.
The Moat Remains Intact (Supposedly)
They keep talking about this “moat.” This supposedly impenetrable barrier that protects them from competitors. It’s built on vertical integration, owning everything from insurance to pharmacies. They have 50 million members, which gives them negotiating power. And data. Lots and lots of data. It’s all very impressive, but moats can be breached, can’t they? Especially if you’re not careful.
Even Berkshire Hathaway bought some shares. Which is…something. It suggests they see value. Or maybe they just have a lot of money to spare. It’s hard to say.
They also have this annual contract structure that allows them to adjust rates each year. Which is convenient. It’s like being able to retroactively increase the price of your services. It feels a bit…unfair, doesn’t it? But apparently, it’s perfectly legal.
A Case for Caution (Because Things Are Never That Simple)
Raising prices is risky. They’re already losing members. If they raise prices too much, healthy members will leave, and they’ll be left with a more expensive, sicker base. It’s a vicious cycle. And it’s enough to keep me awake at night.
Medicare Advantage is facing funding cuts. And Medicaid margins are depressed. It’s a bit of a perfect storm, really. And then there’s the Department of Justice investigation. Pharmacy benefit managers and Medicare Advantage billing practices. It sounds…complicated. And potentially expensive.
Next Steps (Or What I’m Telling Myself to Stay Calm)
The next earnings call will be crucial. We need to see evidence of margin improvement. And easing cost pressures. And a clear picture of membership attrition. And a realistic assessment of Medicaid margins. It’s a lot to ask. But that’s what we’re paying them for, isn’t it?
The stock is trading at 18.8 times earnings estimates for 2026. Which is below its five-year mean. It’s tempting. But not a screaming bargain. It’s a story of steady execution, not a short-term catalyst play. Which means…patience. Something I’m notoriously bad at.
Number of times I’ve considered selling everything and becoming a goat farmer today: 3. And counting.
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2026-01-16 07:33