UnitedHealth Group Inc (NYSE: UNH) is reportedly eliminating commissions that brokers earned on selling some of its Medicare Advantage plans.
Shares of the insurance giant are up slightly in premarket today.
UNH believes cutting commissions will lead to a meaningful decline in enrollment in its higher-cost plans, which in turn could help it lower its overall costs.
Including today’s gain, UnitedHealth shares are up more than 13% versus their year-to-date low.
Could lowering Medicare Advantage costs help UnitedHealth stock?
UnitedHealth’s decision to remove broker commission could prove a positive for its stock price as the strategic shift has the potential to improve the company’s profitability over time.
UNH shares are currently down some 50% versus their all-time high – part of which has actually been related to higher-than-expected costs from its Medicare Advantage plans that even made the management pull its full-year guidance in May.
By cutting broker incentives, UnitedHealth is proactively addressing a significant administrative expense that has contributed meaningfully to derailing its financials in 2025.
While this could mean sacrificing a small percentage of overall enrollment volume, a leaner, more profitable book of business, even if smaller in certain segments, is generally viewed favourably by investors.
Stephanie Link recommends owning UNH shares at current levels
Investors should note that cutting broker commissions doesn’t mean UnitedHealth is entirely out of the woods now since regulatory challenges, nonetheless, persist.
Still, Stephanie Link – the chief investment strategist at Hightower recommends owning the health stock at current levels because it’s trading at unprecedented discount at the time of writing.
UNH shares are currently going for a price-to-earnings multiple of 13 only, which is well below their historical average, she told CNBC in a recent interview.
According to the market veteran, a position in UnitedHealth stock will prove lucrative for investors that stomach the near-term volatility and stick to it through the ongoing turbulence.
UNH remains the world’s largest insurer with an immensely strong balance sheet.
In fact, the NYSE listed firm could soon tap on it to launch an extended stock buyback programme, which could also help UnitedHealth shares reclaim some of their lost ground in the second half of 2025, Link concluded.
Should you load up on UnitedHealth Group Inc today?
Note that UnitedHealth has named Stephen Hemsley in the top role again to help restore its legacy.
Hemsley knows the UNH business inside and out, having served as its chief executive from 2006 to 2017.
His return to the helm and dirt cheap valuation are among reasons why Wall Street isn’t throwing in the towel on the healthcare stock.
Wall Street currently has a consensus “overweight” rating on UnitedHealth Group Inc with a mean price target of about $364, which represents potential upside of some 18% from here.
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