The Chutzpah of the New Lawsuit Against UnitedHealthcare

I’ve spent the last couple of days searching for the right words to encapsulate UnitedHealthcare shareholders’ class action lawsuit against UnitedHealthcare on the grounds that it concealed how backlash from the CEO killing damaged its business model (which includes delaying and denying coverage), and most fitting word seems to be one of my favorites: chutzpah.

The case is Faller v. UnitedHealth Group Incorporated et al., and the initial case filing was on May 7, 2025. The case filing lays out the core complaints: that the UnitedHealthcare leadership not only was privy to proprietary, confidential information about the company’s business operations and that it drafted and disseminated false or misleading statements, in violation of federal securities laws. Specifically citing the killing of Brian Thompson, the filing observes that while UHC’s profits increased, the company became increasingly controversial due to the pervasive denials of coverage, that the investigative journalism outlet ProPublica had just published an exposé on the company’s limiting of mental health coverage, and that the United States Senate had likewise just investigated UHC’s limitation of coverage for Medicare Advantage patients, culminating in the publication of a report outlining its concerning practices. What’s more, the lawsuit lays out the anger and acerbic jokes conveyed about UHC’s practices in the wake of the killing of Thompson.

Now let’s get to the substantive allegations. On December 3, 2024 – the day before Thompson was killed – UnitedHealth introduced its outlook, including net earnings and a slight increase in share price. However, the lawsuit alleges, the “guidance was materially false and misleading at the time it was issued because it omitted how the Company would have to adjust its strategy (which resulted in heightened denials compared to industry competitors) because of scrutiny from the United States Senate, as well as public scrutiny. Because of the change in strategy, the Company was deliberately reckless in issuing the 2025 guidance as it related to net and adjusted earnings per share.”

In a nutshell, we liked the ways you were denying claim after claim, prior authorization after prior authorization, because it made us all a boatload of money, and you weren’t honest about how investigations into your practices might make it harder to keep denying people, so we’re suing.

It doesn’t get better. The litigants continue, “Defendants made false and/or misleading statements and/or failed to disclose that: (1) UnitedHealth had, for years, engaged in a corporate strategy of denying health coverage in order to boost its profits, and ultimately, its share price; (2) this anti-consumer (and at times unlawful) strategy resulted in regulatory scrutiny (as well as public angst) against UnitedHealth, which ultimately resulted in the murder of Brian Thompson; (3) animus towards UnitedHealth was such that, subsequent to the murder of Mr. Thompson, many Americans openly celebrated his demise, expressed admiration for his accused killer, and/or otherwise demanded that UnitedHealth change its strategy even if they condemned Mr. Thompson’s killing; (4) the foregoing regulatory and public outrage caused UnitedHealth to change its corporate practices; (5) notwithstanding the foregoing, UnitedHealth recklessly stuck with the guidance it issued the day before Thompson’s murder, which was unrealistic considering the Company’s changing corporate strategies; and (6) as a result, Defendants’ public statements were materially false and/or misleading at all relevant times.”

So, what does this essentially amount to? “You weren’t supposed to get in trouble for these problematic and potentially unlawful business practices that previously earned us money and if you were going to do these silly things like accept more claims, you should have told us in advance.” Like I said, chutzpah.

But let’s back up a bit and think about the UnitedHealthcare (or, more broadly, private health insurance) business model.

Of course, in any for-profit company (including health insurance), the business model entails fiduciary duties to shareholders, which means employing tactics to not only guard against runaway costs but also maximize quarterly profits. And toward that end, we know that approving every prior authorization and every claim (especially every expensive claim) will not be conducive to that profit maximization. That’s where utilization management and denials come into play.

That’s the business model for private insurance, in which about two thirds of Americans are enrolled thanks to a series of political choices that have successively rejected national health insurance in favor of privatization, even in realms that were typically public (54% of Medicare beneficiaries are now in Medicare Advantage, and 75% of Medicaid beneficiaries are in managed Medicaid plans with companies like Humana, Centene, or UnitedHealthcare).

In a sense, we can only expect that a for-profit company will be profit-minded, except that in the context of health insurance more so than other industries, these profit-minded decisions can come with life-or-death consequences. There are too many cases like this to name, but one name you should know is Nataline Sarkisyan, a 17-year-old leukemia patient who died amid a coverage denial from Cigna, which was subsequently charged with murder.

For my forthcoming book, Coverage Denied: How Health Insurers Drive Inequality in the United States, I interviewed around 70 patients who had experienced coverage delays and denials – some of them constituting mere nuisances that were rectified after a week of stress, and some of them being debilitating and causing months or more of pain and exhaustion (whether a mother unable to secure coverage for her daughter’s higher-level mental health care or a woman’s jaw surgery being dismissed as “cosmetic” despite it correcting a painful condition that impeded chewing and caused severe headaches). And I find that even when these delays and denials are eventually corrected, it can cause substantial administrative burden because health insurance appeals are complex and place significant health literacy demands on patients, especially those from marginalized backgrounds.

This is all to say, the American health care system puts a lot of people throughout the system in untenable positions that will only persist given the difficulty of shifting away from market-based solutions in the current political climate. It is hardly surprising, then, that just 31% of American adults said in November 2024 that the cost of American health care was headed in the right direction, though there was a striking partisan split in the response.

The anger toward private health insurers was obviously magnified in December, with the killing of UnitedHealthcare CEO Brian Thompson eliciting the sharing of health insurance-related tragedies and frustrations across social media platforms (and from across the ideological spectrum). It is perhaps unsurprising that the backlash caused UHC’s stock prices to sink over 22%. That translated to $119 billion in market value.

So, the shareholders are livid that UnitedHealthcare did not update its forecast amid the post-assassination backlash or even the October 2024 Senate report, commissioned by Senator Richard Blumenthal (D-CT), on health insurers’ claim denials in the context of Medicare Advantage plans (“Refusal of Recovery: How Medicare Advantage Insurers Have Denied Patients Access to Post-Acute Care”). In fact, the report finds that UnitedHealthcare’s prior authorization denial rate for post-acute care increased from 10.9% in 2020 to an astonishing 22.7% in 2022, and that it was moving toward reliance on AI models with which to process and deny prior authorizations. (UnitedHealthcare now uses the program nH Predict, which is the subject of a separate lawsuit, which in February a judge allowed to advance.) Both of these incidents – the backlash and the report findings – had led the company to somewhat pare back its anti-consumer tactics (e.g., by reducing some prior authorization requirements), which in turn affected profit margins.

In a nutshell, then, the lawsuit is kvetching that UnitedHealthcare was no longer denying enough in the ways that had generated its previous profits, and hadn’t been transparent about how these revelations about its practices might impact its business model. So, while the lack of transparency is really at the heart of the lawsuit because it led to a perceived artificial inflation of stock price, the broader substantive irony is inescapable.

This litigation will likely be quite protracted (as tends to be the case in the American legal system) and it is unclear whether UnitedHealthcare will ultimately be on the hook for the “substantial damages” pursued by the plaintiffs. As this suit progresses, I know I’ll have my eye on how it shapes the public discourse about the practices of private health insurance, especially as the current administration accelerates America’s reliance on privatization.