UnitedHealth stock plunges, leads insurers lower after Trump Medicare spending plan surprise

The health insurance sector saw a deep sell-off Tuesday, led by a plunge in UnitedHealth Group (UNH) shares, as the Trump administration proposed a lower-than-expected increase to 2027 Medicare Advantage plans.

In a report published Monday night by the Centers for Medicare & Medicaid Services (CMS), the administration proposed that payment rates for Medicare Advantage plans (private insurance plans) will rise by just 0.09% in 2027. Analysts were expecting an increase of as much as 6%.

UnitedHealth (UNH) lost nearly 20%, while fellow major insurers Elevance Health (ELV) and CVS (CVS) each shed around 14%.

The smaller-than-expected proposal comes as margins are already tight for insurers. When UNH reported earnings Tuesday morning, the company said its Medical Care Ratio sat at 89.1%. Other insurers have reported similar rates.

The MCR is a key metric that measures the percentage of premium revenue spent on medical claims and healthcare services for policy members. In UNH’s case, the company uses $0.89 of every dollar the company makes from the premiums it charges customers to pay for medical care.

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UnitedHealth has the largest exposure among insurers to Medicare Advantage changes, accounting for roughly 30% of enrollment nationally. Humana (HUM), which comes in second with roughly 17% of national enrollment, also saw shares plunge over 20% on Tuesday.

The tiny increase for 2027 comes after the insurance got a 5.06% increase for 2026, higher than expected. Final numbers for 2027 are scheduled to be finalized on or before April 6, according to William Blair analysts.

In a statement released after the CMS report, a spokesperson for the insurance industry group AHIP said that, if the proposal is to be implemented, it “could result in benefit cuts and higher costs for 35 million seniors and people with disabilities when they renew their Medicare Advantage coverage in October 2026.”

The proposal “represents an additional headwind for the [Medicare Advantage] sector, further pressuring industry fundamentals,” William Blair analysts wrote in a note to clients published on Tuesday.

UnitedHealth, the country’s largest insurer, took a secondary hit Tuesday morning when the company reported fourth quarter and full-year 2025 revenues that came in below expectations.

Fourth quarter and full-year revenue came in at $113.2 billion and $447.6 billion, respectively, compared to estimates of $113.7 billion and $447.9 billion. Both fourth quarter and full-year revenues were up 12% against the previous year.