Not Just Medicare, UnitedHealth’s Optum Rx Gets Its Own DOJ Checkup

The U.S. Department of Justice's criminal probe into
UnitedHealth Group Incorporated
UNH is broader
than previously reported, per Bloomberg. While investigators had
already been looking at its Medicare Advantage billing practices,
they are also examining Optum Rx, the company's pharmacy benefit
manager (PBM), and how UnitedHealth pays physicians. These
additional lines of inquiry show that the scrutiny extends well
beyond what was initially understood.

UnitedHealth has not been accused of any wrongdoing yet and says
it is cooperating with both civil and criminal requests while
standing by its practices. Even so, the widening investigation has
unsettled investors.

The review of physician payments suggests concern about broader
reimbursement practices. Overall, the current administration has
already targeted PBMs in its broader effort to reduce prescription
drug costs. Together, the new details signal heightened legal and
regulatory risk for the nation's largest health insurer.

Optum Rx, one of the nation's largest PBMs, delivered $5.8
billion in adjusted operating income in 2024 and $2.8 billion in
the first half of 2025. The broader Optum division gives
UnitedHealth valuable diversification at a time when escalating
medical costs are pressuring its core insurance business. Any
regulatory hit to Optum could therefore carry outsized consequences
for the company. UnitedHealth's medical care ratio -- a key measure
of costs as a percentage of premiums -- has already climbed from
83.2% in 2023 to 85.5% in 2024, and further to 87.1% in the first
half of 2025.

Peers Suffering From Rising Medical Costs Trend Too

UnitedHealth's peers, including
Centene Corporation
CNC and
Elevance Health, Inc.
ELV, are also
grappling with rising medical costs, which have already pushed them
to trim their 2025 guidance.

Centene lowered its adjusted EPS outlook to $1.75 for 2025,
significantly down from the previous estimate of $7.25. It now
projects its HBR to spike to 93.5% in the second half of the year
compared with 89.4% last year. Similarly, Elevance reduced its
adjusted EPS forecast to $30, below the prior $34.15-$34.85 range.
ELV's benefit expense ratio is set to reach 90% in 2025, up from
88.5% witnessed in 2024.

UnitedHealth's Price Performance, Valuation and Estimates

Shares of UNH have lost 40.6% in the year-to-date period
compared with the
industry's
decline of 31.4%.

Image
Source: Zacks Investment Research

From a valuation standpoint, UnitedHealth trades at a forward
price-to-earnings ratio of 17.61, still up from the industry
average of 14.83. UNH carries a
Value
Score of B.

Image
Source: Zacks Investment Research

The Zacks Consensus Estimate for UnitedHealth's 2025 earnings is
pegged at $16.21 per share, implying a 41.4% drop from the year-ago
period.

Image
Source: Zacks Investment Research

The stock currently carries a Zacks Rank #5 (Strong Sell).

You can see

the complete list of today's Zacks #1 Rank (Strong Buy)
stocks here
.

Beyond Nvidia: AI's Second Wave Is Here

The AI revolution has already minted millionaires. But the
stocks everyone knows about aren't likely to keep delivering the
biggest profits. Little-known AI firms tackling the world's biggest
problems may be more lucrative in the coming months and years.

See
"2nd Wave" AI stocks now >>

Want the latest recommendations from Zacks Investment Research?
Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report

UnitedHealth Group Incorporated (UNH): Free Stock Analysis
Report

Centene Corporation (CNC): Free Stock Analysis Report

Elevance Health, Inc. (ELV): Free Stock Analysis Report

This article originally published on Zacks Investment Research
(zacks.com).

Zacks Investment Research