UnitedHealth Group's share value experienced a significant decrease of 17% during December.
UnitedHealth Group's (UNH 1.83%) shares experienced a setback in December, primarily due to public outcry following the assassination of an executive and rumors of stricter regulations towards Pharmacy Benefit Managers (PBMs), like UnitedHealth's OptumRx. The business also faced criticism in various media outlets, potentially leading to tighter regulations or changes in the healthcare sector.
Data from S&P Global Market Intelligence revealed a 17% drop in the stock value during December. The graph shows the stock's descent in three stages during the first half of the month, followed by a period of stability for the remainder.
Mounting pressure on UnitedHealth
Initially, UnitedHealth's stocks saw a rise post-December 4, when the CEO of its insurance division was murdered. However, the stock plummeted significantly over the next few days as social media users expressed their discontent with the healthcare system and UnitedHealthcare's practices. Notable statistics included a 32% denial rate of claims, surpassing the industry average twice over. Additional reports highlighted the use of an AI model with a 90% error rate to reject claims. UnitedHealth later contested these allegations, asserting that it approves and pays out 90% of medical claims upon submission.
Following a brief recovery, the stock slid again due to the introduction of a bipartisan Senate bill aimed at eliminating PBMs, a significant income source for UnitedHealth, Cigna, and CVS. All three health insurance stocks suffered losses with the news, and President-elect Trump later echoed this desire to eliminate the "middleman" in drug sales.
At month's end, The Wall Street Journal published a report of UnitedHealth's software occasionally leading doctors to incorrect or irrelevant diagnoses, escalating concerns regarding the company's practices.
UnitedHealth's future prospects
Regardless of whether regulatory modifications impact UnitedHealth's business significantly, the accumulated negative press and public backlash may encourage some customers to reconsider their decision to use the company as their insurance provider.
In early December, UnitedHealth announced its adjusted earnings per share forecast of $27.50-$27.75 for 2024, along with a $29.50-$30 target for adjusted EPS in 2025.
At its current price, the stock boasts a reasonable forward P/E of 17. However, the company may confront ongoing reputational and regulatory threats in 2025.
Amidst these challenges, investors might consider diversifying their finance portfolios, potentially reducing their exposure to UnitedHealth Group stocks. The company's future earnings prospects could be influenced by these regulatory changes and public sentiment.
In light of these uncertainties, wise financial strategists may recommend reallocating some of their money away from UnitedHealth Group shares and towards more stable investments, keeping an eye on how the situation evolves in the finance world.
