UnitedHealth Under Fire as Medicaid & Centene Bombshell Rattle Sector
To curb state-level Medicaid expenditures, the bill gradually limits the use of 'provider taxes' as a revenue source. However, it also allocates $50 billion in funding to support rural hospitals impacted by these cuts. While insurers like UnitedHealth and Humana Inc. HUM may encounter short-term pressure from shrinking Medicaid rolls, they could ultimately benefit as displaced members shift toward private coverage options.
UnitedHealth's Medicaid membership declined 4% in 2023, 5.2% in 2024, and 1.4% in the first quarter of 2025. The proposed elimination of ACA marketplace tax credits will likely propel more people into employer-sponsored plans. Meanwhile, Medicare Advantage may gain traction, as seniors grapple with increased out-of-pocket expenses due to rollbacks in Medicare Savings Programs. UnitedHealth's Medicare Advantage enrollment rose by 8.3% in 2023, 1.9% in 2024, and 6.3% in the first quarter of 2025.
Another major development shook the market as Centene Corporation CNC, a major Medicaid player, withdrew its 2025 earnings guidance late Tuesday, citing unexpected enrollment shifts and higher medical costs. The move, mirroring UnitedHealth's earlier decision, rattled the managed care sector. Centene shares witnessed massive declines following the news, and peers like UnitedHealth and Humana followed suit.
Centene shares plummeted 41.2% following the announcement, dragging down peers: UnitedHealth and Humana dropped 5.4% and 5.1%, respectively, despite broader market gains driven by tech strength and encouraging jobs data.
Price Performance Comparison – UNH, HUM & CNC
Image Source: Zacks Investment Research
UnitedHealth's Valuation and Estimates
From a valuation standpoint, UnitedHealth trades at a forward price-to-earnings ratio of 12.99, up from the industry average of 11.49. UNH currently carries a Value Score of A.
The Zacks Consensus Estimate for UnitedHealth's 2025 earnings is pegged at $22.07 per share, implying a 20.2% drop from the year-ago period.
Image Source: Zacks Investment Research
The stock currently carries a Zacks Rank #5 (Strong Sell).
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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UnitedHealth Group Incorporated (UNH): Free Stock Analysis Report
Humana Inc. (HUM): Free Stock Analysis Report
Centene Corporation (CNC): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
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