Why shares of UnitedHealth, Humana and other insurers tanked - and took the Dow with them

By Steve Goldstein and Jaimy Lee

The U.S. government proposed a very slight increase in Medicare Advantage rates in 2027

Dr. Mehmet Oz, administrator of the Centers for Medicare & Medicaid Services, issued a rate proposal that surprised analysts.

Shares of UnitedHealth, Humana and other health insurers were clobbered Tuesday after a preliminary payment proposal for Medicare Advantage fell way short of analyst expectations.

The Centers for Medicare & Medicaid Services, in a statement late Monday, proposed a 0.09% increase for 2027 rates, versus the expectations of rate growth between 4% and 5%.

Preliminary Medicare Advantage rates are often revised higher.

The news shocked health insurers, with shares of UnitedHealth (UNH) closing 20% lower. (The company separately reported weaker-than-expected fourth-quarter revenue on Tuesday.) Elsewhere, Humana (HUM) lost 21%m CVS Health (CVS) fell 14%, Alignment Healthcare (ALHC) dropped 12% and Elevance Health (ELV) retreated 14%.

The iShares U.S. Healthcare Providers ETF IHF closed 10% lower.

UnitedHealth said Tuesday that it plans to work with the CMS on the final rate, "to avoid a profoundly negative impact on seniors benefits and access to care," according to comments made by UnitedHealthcare CEO Tim Noel during Tuesday's call with analysts.

Because of the way the Dow Jones Industrial Average DJIA is calculated, the decline in UnitedHealth weighed down the blue-chip index by over 400 points, on a day the S&P 500 SPX increased.

Analysts point out the preliminary rates often get revised higher, according to JPMorgan's Lisa Gill, who said that has happened in eight of the last 10 years.

If the reimbursement rate isn't moved higher, she said, managed-care providers will have to trim benefits and focus on margin improvement over membership.

Evercore ISI analysts led by Elizabeth Anderson added that seniors with Medicare Advantage coverage would encounter any plan changes in the final few weeks before the midterm elections - which could create political momentum for a positive rate revision.

The disappointing Medicare Advantage rate proposal for 2027 comes just as there were signs that UnitedHealth's medical cost trends started to improve. Analysts now say that could push back the expected bounce-back in profitability.

"While we still believe cost trend is peaking, the disappointing MA rate notice will likely delay the potential for a double-digit EPS recovery for the industry in 2027 and, as a result, the margin recovery could be delayed further unless there is a major break in cost trends," wrote Mizuho analyst Ann Hynes in a note to clients.

UnitedHealth had 8.4 million Medicare Advantage members in 2025, up from 7.8 million in 2024. The company has said that figure is expected to drop to about 7.3 million in 2026.

-Steve Goldstein -Jaimy Lee

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01-27-26 1712ET