Slow Growth in Medicare Advantage Enrollment Amid Insurer Pullback
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 11 hours ago
0mins
Source: seekingalpha
- Enrollment Growth: As of February 1, approximately 35.5 million Americans were enrolled in Medicare Advantage (MA), reflecting nearly a 3% increase from last year, indicating the program's ongoing appeal among older adults and individuals with disabilities.
- Slowing Growth Rate: Despite the increase in enrollment, the annual growth rate for 2025 is only 1%, a significant decline from the historical average of 7%-10% between 2017 and 2024, highlighting market fatigue and intensified competition.
- Insurer Pullback: Nearly all health insurers, including UnitedHealth (UNH) and CVS Health (CVS), have been scaling back their market presence, contributing to the overall slowdown, with only Humana (HUM) increasing its enrollment numbers.
- Market Competition Landscape: UnitedHealth (UNH) remains the largest operator in the MA market, followed by Humana (HUM), while other players like CVS Health's Aetna unit, Clover Health (CLOV), and Alignment Healthcare (ALHC) also hold significant positions in the market.
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Analyst Views on UNH
Wall Street analysts forecast UNH stock price to rise
19 Analyst Rating
16 Buy
3 Hold
0 Sell
Strong Buy
Current: 289.090
Low
330.00
Averages
397.82
High
444.00
Current: 289.090
Low
330.00
Averages
397.82
High
444.00
About UNH
UnitedHealth Group Incorporated is a healthcare and well-being company. Its segments include Optum Health, Optum Insight, Optum Rx, and UnitedHealthcare, which includes UnitedHealthcare Employer & Individual, UnitedHealthcare Medicare & Retirement and UnitedHealthcare Community & State. Optum Health offers comprehensive and patient-centered care, addressing the physical, mental, social, and financial well-being. Optum Health delivers primary, specialty and surgical care; helps patients and providers navigate and address complex, chronic and behavioral health needs. Optum Insight connects the healthcare system with services, analytics and platforms that make clinical, administrative and financial processes simpler and more efficient for all participants in the healthcare system. Optum Rx offers a range of pharmacy care services through retail pharmacies, through home delivery, specialty and community health pharmacies and the provision of in-home and community-based infusion services.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Uncertain Medicare Outlook: The uncertainty surrounding the proposed payment increase for Medicare Advantage plans in 2027 has left investors uneasy, particularly if the final increase is lower than expected, which could negatively impact the company's profitability.
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- Enrollment Growth: As of February 1, approximately 35.5 million Americans were enrolled in Medicare Advantage (MA), reflecting nearly a 3% increase from last year, indicating the program's ongoing appeal among older adults and individuals with disabilities.
- Slowing Growth Rate: Despite the increase in enrollment, the annual growth rate for 2025 is only 1%, a significant decline from the historical average of 7%-10% between 2017 and 2024, highlighting market fatigue and intensified competition.
- Insurer Pullback: Nearly all health insurers, including UnitedHealth (UNH) and CVS Health (CVS), have been scaling back their market presence, contributing to the overall slowdown, with only Humana (HUM) increasing its enrollment numbers.
- Market Competition Landscape: UnitedHealth (UNH) remains the largest operator in the MA market, followed by Humana (HUM), while other players like CVS Health's Aetna unit, Clover Health (CLOV), and Alignment Healthcare (ALHC) also hold significant positions in the market.
See More
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- Stock Price Decline: UnitedHealth Group's stock has plummeted by 35% over the past year due to higher-than-expected medical costs and a CEO change, leading to diminished investor confidence in the company's future.
- Dividend Stability: Despite these challenges, UnitedHealth's dividend payout ratio remains below 45%, and CFO Wayne DeVeydt indicated that the dividend for 2026 will be well-supported by earnings and cash flow, demonstrating stability in its dividend policy.
- Uncertain Medicare Outlook: The uncertainty surrounding the proposed payment increase for Medicare Advantage plans in 2027 has left investors uneasy, particularly if the final increase is lower than expected, which could negatively impact the company's profitability.
- Changing Investment Thesis: Although the stock has declined, UnitedHealth's forward dividend yield now exceeds 3%, making it more attractive for income investors, even as the overall investment outlook is clouded by uncertainty.
See More
UnitedHealth Group: A Top Healthcare Stock for the Next Decade
- Stock Performance Decline: As of February 16, UnitedHealth Group's stock has fallen over 41% in the past 12 months, primarily due to disappointing earnings, potential Medicare changes, and poor public relations, indicating significant challenges ahead.
- Vertical Integration Advantage: UnitedHealth Group's vertical integration through its insurance business (UnitedHealthcare) and care business (Optum) allows it to collect revenue from multiple parts of the healthcare ecosystem, enhancing its competitive position in the market.
- Diversified Revenue Streams: The insurance segment is projected to generate over $352 billion in premiums by 2025, while Optum earns revenue by providing healthcare services and products (e.g., doctors, pharmacies, data), which mitigates business risk through diversified income sources.
- Significant Scale Effects: In the healthcare sector, the scale provides UnitedHealth with negotiating power when dealing with drugmakers and hospitals, ensuring that even if one part of the business faces difficulties, the other can provide support, securing the company's long-term stability.
See More
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- Leadership Changes: UnitedHealth Group's unexpected CEO departure led to the return of longtime CEO Stephen Hemsley, aiming to restore confidence and drive growth through stable leadership.
- Rising Healthcare Costs: The company's earnings growth has been impacted by rising healthcare costs and higher-than-expected service utilization, prompting UnitedHealth to implement measures such as cutting certain plans, adjusting prices, and leveraging AI for efficiency.
- Independent Study Findings: An independent study concluded that UnitedHealth's processes are 'robust' while suggesting improvements, indicating the company's commitment to enhancing operational efficiency and compliance despite facing a government probe.
- Medicare Payment Rate Proposal: The Trump administration's proposal to keep Medicare Advantage payment rates flat in 2027 could affect UnitedHealth's profitability; however, the company diversifies its revenue through employer insurance plans, mitigating potential risks.
See More
UnitedHealth Group Faces Challenges and Opportunities
- Executive Changes Impact: Following the unexpected departure of its CEO, UnitedHealth Group reinstated longtime CEO Stephen Hemsley to stabilize leadership and restore investor confidence, thereby laying a foundation for future growth.
- Rising Healthcare Costs: UnitedHealth's earnings growth has been hampered by higher-than-expected service utilization, prompting the company to cut certain plans and adjust pricing to enhance operational efficiency and address escalating healthcare costs.
- Medicare Payment Policy Risk: The Trump administration's proposal to keep Medicare Advantage payment rates flat in 2027 could pressure UnitedHealth's profitability; however, the company emphasizes its diversified revenue streams, mitigating reliance on a single business line.
- Long-Term Growth Outlook: Despite facing short-term challenges, UnitedHealth remains optimistic about the future, predicting an increase in growth momentum leading into 2027, indicating the company's resilience and adaptability in navigating market changes.
See More
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- Policy Advocacy: FDA Commissioner Marty Makary stated in Washington that the agency plans to push for more prescription drugs to become over-the-counter (OTC) this year, aiming to improve drug accessibility and reduce healthcare costs, which could allow patients to obtain basic safe medications without a doctor's visit.
- Regulatory Streamlining: Legislation passed by Congress in November simplifies the regulatory process for transitioning prescription drugs to OTC status, including full, conditional, and partial switch pathways, which is expected to accelerate drug availability and enhance patient convenience in medication access.
- Increased Transparency: Makary emphasized that OTC sales would bypass insurers and pharmacy benefit managers, potentially lowering drug prices and increasing transparency, with cash prices for OTC medications possibly being lower than patients' copays for prescription drugs, thereby alleviating financial burdens on patients.
- Industry Pushback: The pharmaceutical industry has raised concerns about this policy, arguing that OTC drugs may not be covered by insurance, leading to higher costs for patients, and that the FDA lacks authority over drug pricing, necessitating thorough consultations with manufacturers before any transitions.
See More
Slow Growth in Medicare Advantage Enrollment Amid Insurer Pullback
- Enrollment Growth: As of February 1, approximately 35.5 million Americans were enrolled in Medicare Advantage (MA), reflecting nearly a 3% increase from last year, indicating the program's ongoing appeal among older adults and individuals with disabilities.
- Slowing Growth Rate: Despite the increase in enrollment, the annual growth rate for 2025 is only 1%, a significant decline from the historical average of 7%-10% between 2017 and 2024, highlighting market fatigue and intensified competition.
- Insurer Pullback: Nearly all health insurers, including UnitedHealth (UNH) and CVS Health (CVS), have been scaling back their market presence, contributing to the overall slowdown, with only Humana (HUM) increasing its enrollment numbers.
- Market Competition Landscape: UnitedHealth (UNH) remains the largest operator in the MA market, followed by Humana (HUM), while other players like CVS Health's Aetna unit, Clover Health (CLOV), and Alignment Healthcare (ALHC) also hold significant positions in the market.
See More
