The American healthcare landscape is changing very fast, but for UnitedHealth Group, this news does not sound particularly good. It was the killing of its executive that brought an unfavorable focus on the industry-wide policies. Now it could come under further pressure as scrutiny of the insurance industry begins and healthcare for the public comes back in focus.
UnitedHealth Group Incorporated is a diversified healthcare company that offers health insurance and healthcare services through its two main business platforms, UnitedHealthcare and Optum. This Minnesota-based company excels in the industry by providing comprehensive care solutions that enhance patient results and improve healthcare delivery. UnitedHealth Group mainly caters to the following types of customers: those seeking health coverage, businesses with a need for employee benefit solutions, and government entities managing public health programs.
UNH provides multiple health insurance products, Medicare and Medicaid plans, pharmacy care services via OptumRx, data analytics through OptumInsight, and numerous other health management solutions. Key sources of income are health insurance premiums from its policies, service fees received for managed care services, and pharmacy benefit management.
Americans have become more outspoken in their criticism of the rates at which health insurance companies deny claims and the complexity of their procedures. Meanwhile, the popularity of radical healthcare reform in the form of Medicare for All continues to rise, suggesting that it may be trouble for organizations like UnitedHealth Group. Recent legislative moves, particularly the ‘No Surprise Act’ and the Inflation Reduction Act, have only added further pressure on these companies.
Although UnitedHealth has done well under the present structure, these policy shifts, and growing congressional support for Medicare for All, represent a warning sign for the model. With 116 co-sponsors on the Medicare for All Act, the political threat to private insurers is on solid ground. Topped with a high multiple and a price-to-earnings ratio approaching 20, UNH’s future growth prospects are becoming a problem.
UnitedHealth Group faces imposing barriers that might alter the trajectory of future direction. The legislative move for new propositions and growing momentum towards Medicare for All casts gloom over prospects for this company. Having considered all these risks, we still believe in our bearish thesis on UNH as the healthcare infrastructure gets ready for a structural shift.
UNH is 18th on our latest list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 112 hedge fund portfolios held UNH at the end of the third quarter which was 114 in the previous quarter. While we acknowledge the potential of UNH as a leading investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as UNH but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.