Is United Healthcare A Buy or Bye?
๐๐๐As the largest healthcare insurer in the US, commanding a massive 30% share of the Medicare Advantage market and hauling in a staggering USD 447.6 billion in revenue for 2025, $UnitedHealth(UNH)$
UNH's "Grey Swan" Event: Why The Dip?
The recent bloodbath wasn't just a bad day. It was a 20% plunge that wiped out USD 80 billion in value for UNH. The catalyst? A government proposal for a 0.09% Medicare Advantage rate increase for 2027. This completely blindsided the market after analysts were banking on 4% to 6% increase. It was an unexpected risk, leaving investors reeling in despair.
Is UNH in the Buy Zone?
For the bold investor, this looks like a classic high conviction dip buy opportunity. Here is why:
Valuation Goldmine : Trading at just 16x forward earnings which is way below its usual 21x, UNH is practically on sale. You are getting the industry leader at a deep discount because of a proposed rate that isn't even final yet.
Massive Upside Potential : Analysts are holding the line with an average price target of USD 396. If the final rates in April come in even slightly better than the proposal, we could see a huge relief rally.
The Optum Fortress: UNH isn't just an insurer. Its Optum division is a healthcare services powerhouse that acts as a shield against regulatory drama.
What is Optum?
Optum is not a health insurance company. Instead it is a massive, integrated collection of health services that operates across the entire healthcare spectrum.
OptumHealth: Provides direct care through clinics, and employed physicians, focusing heavily on value based care models that improve patient outcomes while controlling costs.
OptumInsight : Offers data analytics, technology solutions and consulting services to other healthcare providers and payers.
OptumRx: A major pharmacy benefit manager that negotiates drug prices and manages prescription benefits.
Why is Optum A Fortress for UNH?
The recent UNH selloff was entirely about the insurance side of the business. Here is how Optum mitigates that risk :
1. Revenue & Earnings Diversification : Optum is no longer the side business. It is projected to generate a majority of the group's total operating earnings in 2026. If the insurance arm faces pressure, Optum's different revenue streams help to stabilise the overall corporate earnings.
2. Insulation from Payer Regulation : When the government changes the rules for Medicare Advantage payments as seen with the recent proposal, it primarily hits the UNH insurance segment. Optum, however, derives a significant portion of its revenue from servicing other healthcare systems and companies, making it less directly exposed to that specific regulatory headwind.
3. Future Growth Engine : Optum is at the forefront of the industry's shift towards value based care and data driven efficiency. Management is heavily investing in AI within Optum to find USD 1 billion in OPEX savings in 2026 alone. This focus on efficiency and better care delivery is the primary long term growth story for UNH, largely independent of whether the Medicare Advantage rates are 0.09% or 4%.
In short, the insurance side of UNH is currently taking a hit from a regulatory storm but the Optum fortress provides essential shelter and a pathway to recovery, giving saavy investors confidence in the long term buy signal.
The Risk Reality
UNH's short term momentum is Bearish. If you are looking for a quick trade, the volatility might bite. But for the long term player? This is the kind of entry point that people talk about for years.
Regulatory Uncertainty : The final 2027 rates remain a major variable and any disappointment could prolong volatility.
High Medical Costs: UNH reported a rising Medical Care Ratio of nearly 89% in Q4 25, indicating higher than expected medical claim costs driven by higher utilisation of services. Management is focused on controlling these costs through margin expansion strategies, but success is not guaranteed.
Potential Dip Buy Levels
While the long term fundamentals look strong, technical analysis indicates near term momentum is Bearish. It is currently trading around USD 294.02, up 4% from its recent lows. The immediate challenge for UNH is breaking above USD 305. Today's trading saw high volume of over 23 million shares, nearly double its average, indicating strong conviction behind the buying today.
Concluding Thoughts
Is $UnitedHealth(UNH)$
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Likely to recover