UnitedHealth Group Stock Plummets 12% as DOJ Launches Civil Fraud Probe

In a shocking turn of events, shares of UnitedHealth Group ($UNH) nosedived by 12% today following news that the U.S. Department of Justice (DOJ) has launched a civil fraud investigation into the company’s Medicare billing practices. The probe, which has sent shockwaves through the healthcare and financial sectors, centers on allegations that UnitedHealth improperly overbilled Medicare Advantage, the government’s privately-run alternative to traditional Medicare.

The Allegations

At the heart of the DOJ’s investigation is whether UnitedHealth systematically exaggerated patient conditions to inflate Medicare payments. Federal prosecutors have long scrutinized Medicare Advantage providers for so-called “risk adjustment” practices—essentially, increasing payments by making enrollees appear sicker than they actually are.

UnitedHealth, the largest Medicare Advantage insurer in the country, has faced similar allegations in the past. In 2017, a whistleblower lawsuit accused the company of using improper coding tactics to bilk the government out of billions. The DOJ later intervened in that case, alleging UnitedHealth knowingly submitted false claims to boost profits. While the company has denied wrongdoing and fought these cases aggressively, today’s announcement signals that the federal government is escalating its efforts.

Market Fallout

Investors wasted no time reacting, dumping UnitedHealth shares en masse. A 12% plunge in stock price wiped out billions in market capitalization within hours, signaling deep concern over potential regulatory and financial fallout. The selloff also dragged down other healthcare insurers, with Humana, CVS Health, and Centene all taking hits as traders feared broader scrutiny into the Medicare Advantage sector.

Beyond reputational damage, the investigation could result in hefty fines, a repayment of fraudulent claims, or even restrictions on UnitedHealth’s Medicare Advantage business. Given that the program accounts for a significant portion of the company’s revenue, any regulatory crackdown could have lasting consequences.

The Verdict: Sell

UnitedHealth Group has thrived in a system designed for easy profit extraction—until now. This latest probe is not just another regulatory headache; it’s a potential seismic event for the company’s business model. If the DOJ follows through with legal action, we could be looking at not just fines but fundamental changes to how Medicare Advantage insurers operate.

With uncertainty swirling and a battered stock price likely to face further volatility, there’s only one logical move: Sell.

Bill White Says…

“When the DOJ comes knocking, it’s rarely a social call. If UnitedHealth was upcoding patients like a hypochondriac on steroids, expect the government to make them pay. Meanwhile, investors are learning that 'risk adjustment' isn’t just for Medicare—it applies to stock portfolios too.”