UnitedHealth: Senate Committee Finds Aggressive Risk Assessments in Medicare Advantage

Key Morningstar Metrics for UnitedHealth Group

• Fair Value Estimate: $427.00
• Morningstar Rating: ★★★★
• Morningstar Economic Moat Rating: Narrow
• Morningstar Uncertainty Rating: High

According to the Wall Street Journal, a US Senate committee has reported “aggressive” risk-adjustment tactics in Medicare Advantage at UnitedHealth Group UNH, although no formal recommendations were made and no wrongdoing was found. UnitedHealth shares were down about 1% in pre-market trading on the news.

Why it matters: The news comes after media reports and other regulatory inquiries intensified questioning of risk assessments that determine government payments to insurers like UnitedHealth in the important Medicare Advantage market in early 2025.

• As the largest MA insurer and probably one of the more aggressive risk-assessors in the bunch, UnitedHealth is being called out specifically for recording diagnoses that would boost Medicare Advantage payments from the government on a risk-adjusted basis.
• Similarly, another government report from the Office of Inspector General in October 2024 found substantial overpayments in Medicare Advantage on diagnoses that were unsupported with further service records, including UnitedHealth as the leading beneficiary of such overpayments.

The bottom line: We are keeping our fair value estimates intact for UnitedHealth and the rest of the MCO industry, as we started incorporating negative consequences associated with potential new Medicare Advantage regulation in our base case valuations in May 2025, as increasing scrutiny rose around those practices.

• Specifically, we suspect further regulation of the Medicare Advantage end market could lead to major fines related to previous overpayments and lower ongoing profit margins for MA insurers than they have produced historically.
• However, we recognize the significant uncertainty surrounding the magnitude and timing of these potential regulations, and our Uncertainty Ratings are inflated by about one notch from norms. For example, we currently have a High Uncertainty Rating on UnitedHealth, versus Medium historically.