Key Points in This Article:
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UnitedHealth Group (UNH), the largest U.S. health insurer, has faced a turbulent 2025 with a series of misfortunes that cut UNH stock in half.
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Despite the challenges, UNH’s diversified operations and leadership changes signal core strength that recent events may now make the stock a buy.
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Health Insurance Giant’s Changing Fortunes
UnitedHealth Group (NYSE:UNH) is the largest U.S. health insurer by market cap and revenue, and dominates the healthcare industry through its UnitedHealthcare insurance arm and Optum health services.
Its Medicare Advantage plans, generating an
- In December, UnitedHealthcare CEO Brian Thompson was assassinated, sparking public backlash over the company’s claims denial process.
- UNH suffered a rare first-quarter earnings miss.
- High medical costs led to an 18% stock price drop in May.
- CEO Andrew Witty abruptly resigned.
- A Department of Justice (DOJ) criminal probe was launched into Medicare fraud allegations, intensifying scrutiny.
- A cyberattack on subsidiary Change Healthcare cost and estimated $2.3 billion, compromising
UNH’s stock plummeted, losing half of its value and erasing $300 billion in market capitalization. Yet, two recent developments may signal a turning point for investor sentiment.
DOJ Probe Shift
A June 2025 report by The Capitol Forum indicates the DOJ is redirecting its investigation from UnitedHealth’s Medicare Advantage billing practices to its OptumRx pharmacy benefit manager (PBM) unit.
The original probe, launched in the summer of 2024, targeted alleged “upcoding” in Medicare Advantage plans, where diagnoses were inflated to secure higher government payments, reportedly generating $8.7 billion in 2021 alone.
This shift reduces immediate risk to UNH’s core $137 billion Medicare business, as PBMs, while significant (OptumRx generated $133.2 billion in revenue in 2024), are less central to profitability.
The investigation’s new focus on PBM practices, such as drug pricing and formulary management, may lead to fines or reforms, but is less likely to disrupt UNH’s insurance operations.
Analysts suggest this pivot lowers the threat of severe penalties, as PBM issues are industry-wide and less tied to fraud allegations. However, the probe’s outcome remains uncertain, with potential for reputational damage resulting if misconduct is uncovered.
Medicaid Tax Relief
The U.S. Senate Parliamentarian’s rejection of a key provision in President Trump’s Big Beautiful Bill (BBB) — which just passed the Senate after Vice President Vance cast the deciding vote to break a 50-50 split — is now awaiting House approval. If the bill makes it through reconciliation intact, it further bolsters UNH’s outlook.
The provision aimed to restrict states’ use of Medicaid provider taxes — levies on healthcare providers like hospitals, which states use to draw down federal Medicaid matching funds. In 2024, these taxes generated $19 billion across 43 states, funding Medicaid programs where UNH is a major player, covering 8.7 million Medicaid beneficiaries.
The restriction threatened to reduce state Medicaid budgets, potentially cutting reimbursements to insurers like UNH, which derives 15% of its revenue from Medicaid.
With UNH’s heavy Medicare and Medicaid exposure, the provision’s removal lifts a significant financial cloud. If signed into law without the restriction, the BBB stabilizes UNH’s Medicaid revenue stream, helping mitigate risks from budget cuts that could have squeezed margins.
Is UNH Stock a Buy?
The DOJ’s pivot to OptumRx and the Senate’s rejection of the Medicaid tax restriction mark a turning point for UNH. The stock, trading at $314 per share (down 37% year-to-date), offers a compelling valuation with a P/E of 12.4, below the industry average of 18.4.
Insiders were heavily buying UNH stock in May, and a 5.2% dividend increase signal confidence in the company’s fundamentals. The DOJ probe, while ongoing, poses less risk to core operations, and the BBB’s progress preserves Medicaid revenue.
Analyst consensus ratings call UNH a buy or strong buy, with a $385 price target, implying 22% upside. The health insurer’s scale, diversified revenue, and Stephen Hemsley’s return as CEO bolster its stability.
However, risks linger: PBM scrutiny could lead to fines, and public distrust from the Thompson killing may persist. Previously, I recommended that investors wait for greater clarity before buying this deeply discounted behemoth. While the situation is improving, there is still uncertainty ahead.
For long-term investors, UNH’s discounted valuation and resolved pressures may make it a buy, though short-term volatility still warrants caution until the Big Beautiful Bill is signed.
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