UnitedHealth Suffering From Elevated Medical Cost Trends and Intensifying Regulatory Scrutiny

UnitedHealth Group operates a top-tier health insurer (UnitedHealthcare), pharmacy benefit manager (Optum Rx), provider (Optum Health), and health analytics franchise (Optum Insight). Historically, this integrated strategy resulted in some of the best returns in the managed care industry that other managed care organizations have attempted to copy, including CVS Health that added Aetna's medical insurance assets to its retail stores and PBM and Cigna that added Express Scripts' PBM assets to medical insurance base. With the alignment of these interests, we think vertically integrated organizations like UnitedHealth have the opportunity to help bend the healthcare cost curve in the US. However, questions continue to swirl around whether UnitedHealth's pursuit of profits outweighs those potential benefits to the system.