UnitedHealth Group, one of America’s largest insurers and a member of the Dow Jones Industrial Average, is suddenly on the verge of collapse. The crisis at UnitedHealth culminated this week with the sudden resignation of CEO Andrew Witty for “personal reasons.”
The company also dropped its financial guidance, blaming the decision on soaring medical costs. And as if that weren’t enough, the Wall Street Journal revealed that UnitedHealth is under federal criminal investigation for possible Medicare fraud.
The developments have shocked investors, causing a sharp loss of confidence. UnitedHealth (UNH) stock has lost half its value — or about $288 billion — in just a month.
The stock price has plunged to its lowest level since April 2020, at the height of the pandemic. This is a spectacular reversal for one of the most powerful US business groups and the largest health insurance provider in the country.
How did the crisis begin?
The crisis at UnitedHealth comes nearly six months after the murder of Brian Thompson, one of its top executives. Thompson’s murder in midtown Manhattan had drawn global attention and highlighted deep public resentment toward the health care industry (please also read our analysis titled “What does the assassination of the CEO of United Healthcare “signal”?“)
The stock’s decline accelerated after the Wall Street Journal reported on the criminal investigation. The report said the Department of Justice’s (DOJ) health fraud unit was overseeing an investigation into possible Medicare fraud by UnitedHealth.
The company responded with a statement, calling the WSJ report “deeply irresponsible,” as the newspaper itself admitted that the exact nature of the potential criminal charges remains unclear. The DOJ declined to comment.
“Astronomical collapse”
The sudden change in leadership suggests that the board has “lost confidence” in the CEO. The fact that the board moved so quickly suggests that something is seriously wrong. UnitedHealth has described Witty’s departure as his own decision for “personal reasons,” but also said he would continue as a senior advisor.
To deal with the crisis, UnitedHealth has turned to a familiar face: Stephen Hemsley, the former CEO and current chairman of the board. Hemsley praised Witty for his “integrity and compassion” during a difficult time, but he also made no secret of his displeasure with the company’s mistakes:
“To all involved — employees and shareholders — I express my deep disappointment and apologize for the failures, both external and internal.”
Caveats
Hemsley takes over with significant challenges ahead. In addition to the DOJ investigation, UnitedHealth is under scrutiny from multiple federal agencies.
In its annual report, the company admits that it is or has been involved in “various government investigations, audits, and assessments.”
These include both “routine and special investigations” by agencies such as the DOJ, the Internal Revenue Service (IRS), the Department of Labor, and the Securities and Exchange Commission (SEC). The decision to abandon its 2025 financial guidance has caused significant concern among investors.
It could take years for the company to recover.
