Key Points
The medical care ratio is a key metric for UnitedHealth Group's business as it measures how efficient its operations are.
The ratio has been rising, and it came in at over 89% last year.
For years, UnitedHealth Group (NYSE: UNH) stock has been a terrific growth investment. In fact, it looked unstoppable. Not only did it repeatedly grow its dividend, but the stock was amassing some outstanding results along the way. It was looking like the ultimate healthcare stock to own for the long term.
But things have changed drastically for UnitedHealth Group within just the past 12 months. Concerns about rising costs and investigations into its billing practices have significantly weighed on its valuation. During that time frame, the stock has fallen by 37%. It finished last week at a price of around $293, which is down significantly from its 52-week high of more than $606.
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This year, it's already down more than 10%. And whether the health insurance giant is able to turn things around could hinge on one very important metric.
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UnitedHealth's medical care ratio is a crucial metric for the stock
The key metric that investors and analysts often focus on for UnitedHealth Group is its medical care ratio. This represents how much of the premiums the company collects are spent on medical care for its members. The higher the ratio is, the worse the prospects for profitability are.
For UnitedHealth, the ratio has been rising in recent years. In 2025, the medical care ratio for the full year was 89.1%, up from 85.5% in the previous year, which was already higher than the 83.2% it averaged in 2023. Without a significant decline and improvement in that rate, investors may be concerned about the ability of UnitedHealth to grow its profits. The company blames the increase on a number of factors, including Medicare funding reductions and "accelerating medical cost trends." Its ability to keep costs down will be crucial for the business to show investors it's moving in the right direction.
A turnaround for the stock could take time
UnitedHealth stock is a much riskier-looking stock than it has been in the past. It's no longer trading at a multi-year low, but by no means is it taking off and looking like it'll recover anytime soon from its massive sell-off. There are some big clouds hovering over the stock these days, including how ongoing investigations into its billing practices might impact its future growth, and if it can find enough efficiencies and opportunities to bring down its costs and improve margins.
At 3%, the stock does offer an above-average yield, but investors may not have much confidence in the dividend if the underlying business isn't doing all that well. If you are comfortable with some risk, then UnitedHealth Group could be worth taking a chance on for the long term, but only if you're prepared to hang on for several years. However, with an uncertain future ahead, you may be better off simply taking a wait-and-see approach with the healthcare stock for now.
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David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool recommends UnitedHealth Group. The Motley Fool has a disclosure policy.
