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

The health insurance sector saw a deep sell-off on Tuesday, led by a drop in UnitedHealth Group ( UNH ) shares, after the Trump administration proposed a smaller-than-expected increase in 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) would increase by only 0.09% in 2027. Analysts had expected a rise of up to 6%.

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

The smaller-than-expected offer comes as margins are already tight for insurers. When UNH reported earnings Tuesday morning, the company said its medical care ratio stood at 89.1%. Other insurers have reported similar rates.

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 premiums paid to customers for medical care.

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UnitedHealth has the largest exposure to Medicare Advantage changes among insurers, accounting for nearly 30% of enrollment nationally. Humana ( HUM ), which ranks second with nearly 17 percent of national enrollment, also fell more than 20 percent on Tuesday.

The small increase for 2027 comes after insurance saw a 5.06% increase for 2026, more than expected. The final numbers for 2027 will be finalized on or before April 6, according to William Blair analysts.

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

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

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

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