UnitedHealth Stock Plunge Follows CMS Rate Shock

UnitedHealth Group reported fourth-quarter 2025 results and issued 2026 guidance on Jan. 27, 2026, as its stock plunge accelerated following a preliminary Centers for Medicare & Medicaid Services (CMS) Medicare Advantage rate proposal and a cautious outlook. The combined announcements triggered a single-day rout that erased billions in market value.

Q4 Results and 2026 Guidance

UnitedHealth said in its Jan. 27 earnings release that fourth-quarter net earnings fell to $218 million from $2.8 billion a year earlier. Adjusted earnings per share were $2.11, slightly above the FactSet consensus of $2.10. Revenue for the quarter was $113.2 billion, just below the $113.8 billion estimate. The full-year 2025 medical care ratio, a measure of medical costs as a percentage of revenue, rose to 88.9% from 85.5% in 2024.

The company recorded a $1.6 billion net charge in the quarter, including $799 million in final costs related to the 2024 Change Healthcare cyberattack and $2.5 billion in restructuring expenses. These were partly offset by a $442 million gain from portfolio divestitures.

By segment, UnitedHealthcare insurance revenue rose to $87.1 billion from $74.1 billion a year earlier, exceeding estimates. Optum, the provider and pharmacy-benefit manager unit, reported $70.3 billion in revenue, up 8% from $65.1 billion and also above expectations.

For 2026, UnitedHealth forecast revenue to decline by at least 2% to more than $439 billion and set an adjusted EPS floor of $17.75. The company expects a medical care ratio of 88.8%. Management signaled a strategic shift to prioritize margin expansion and cost reduction over membership growth. It plans to shed unprofitable Medicare Advantage and Affordable Care Act members, divest certain clinics and provider assets, and pursue about $1 billion in operating expense savings through artificial intelligence and other efficiency measures. The company targets a 5.5% EBIT margin.

Medicare Advantage enrollment rose to 8.4 million in 2025 from 7.8 million in 2024. UnitedHealth expects membership to decline to about 7.3 million in 2026.

CMS Rate Proposal and Market Impact

Late on Jan. 27, CMS issued a preliminary Medicare Advantage rate proposal that would raise 2027 rates by 0.09%. This marked a sharp departure from the prior-year 5.06% increase and fell well below analyst expectations of roughly 4% to 5%. Preliminary Medicare Advantage rates have been revised upward in eight of the past 10 years.

The combined regulatory notice and the company’s cautious 2026 outlook sent UnitedHealth shares tumbling about 20% in a single session, with premarket trading down roughly 12.3%. The decline erased an estimated $50 billion in market value and left the stock down about 35% over the past 12 months, compared with a roughly 16% gain for the S&P 500.

The selloff extended across the health-insurance sector. Humana shares dropped 21%, CVS Health fell 14%, Alignment Healthcare slid 12%, and Elevance Health lost 14%. The iShares U.S. Healthcare Providers ETF plunged about 10%, and the Dow Jones Industrial Average fell more than 400 points.

On the earnings call, UnitedHealthcare CEO Tim Noel said the company plans to work with CMS on the final rate to avoid a profoundly negative impact on seniors’ benefits and access to care. Analysts warned that the disappointing initial Medicare Advantage rate could delay the industry’s expected return to double-digit EPS growth in 2027 unless medical-cost trends ease significantly.

UnitedHealth also faces ongoing civil and criminal investigations into its Medicare business, adding regulatory scrutiny as it pursues its margin-first strategy.