Why did US health insurance stocks crash today? UnitedHealth, Humana, Elevance Health, CVS shares tumble after minimal Medicare Advantage boost

US health insurance stocks tumbled Tuesday as the Trump administration proposed a much smaller-than-expected increase to 2027 Medicare Advantage plans, leaving investors and seniors alike concerned about potential cost and benefit changes.

Health Insurance Stocks Plunge After CMS Proposes Only 0.09% Increase in 2027 Medicare Advantage Rates

The Centers for Medicare & Medicaid Services (CMS) announced on Monday night that payment rates for Medicare Advantage plans, private insurance options for seniors, would rise by just 0.09 percent in 2027, well below analysts’ predictions of up to 6 percent, as per a report.

UnitedHealth and Other Major US Insurers Hit Hard by CMS Announcement

The announcement sent shockwaves through the sector. UnitedHealth Group (UNH) shares plunged nearly 20 percent, while Elevance Health (ELV) and CVS (CVS) each fell more than 12 percent. Humana (HUM), the second-largest provider in the program, saw its stock drop close to 20 percent.


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Understanding UnitedHealth’s Medical Care Ratio and Tight Margins

Insurers are already navigating tight margins. UnitedHealth reported a Medical Care Ratio (MCR) of 89.1 percent, meaning the company spends 89 cents of every premium dollar on member healthcare, as per a Yahoo Finance report. With about 30 percent of national Medicare Advantage enrollment, UnitedHealth is most exposed to CMS changes, followed by Humana at 17 percent.

How the Proposal Could Affect 35 Million Seniors and People with Disabilities

The proposed 2027 increase comes after a higher-than-expected 5.06 percent rise for 2026. Final rates for 2027 are expected by April 6, 2026, according to analysts at William Blair, reported Yahoo Finance.

The insurance industry warned that the proposal could have real consequences for seniors. A spokesperson for 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," as quoted by Yahoo Finance.

William Blair analysts described that the proposal "represents an additional headwind for the [Medicare Advantage] sector, further pressuring industry fundamentals," as quoted by Yahoo Finance.

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UnitedHealth Revenue and Earnings Miss Expectations Slightly

UnitedHealth also reported quarterly and full-year revenues slightly below estimates. Fourth-quarter revenue was $113.2 million versus $113.7 million expected, and full-year revenue came in at $447.6 million versus $447.9 million, as per the Yahoo Finance report. Both figures represented a 12 percent increase from the previous year. Quarterly earnings per share were $2.11, in line with expectations but down roughly 70 percent from the same quarter in 2024. The company also noted a $799 million revenue hit from a February 2024 cyberattack on its subsidiary, Change Healthcare.

Upcoming Earnings Reports to Watch: Elevance Health, CVS, Humana, Cigna

Investors now look ahead to upcoming earnings reports from Elevance Health on January 28, followed by CVS, Humana, and Cigna Group (CI) in February.

FAQs

Why did health insurance stocks fall?

Stocks dropped after CMS proposed a tiny 0.09% increase in 2027 Medicare Advantage payments, lower than expected.

Which insurers were most affected?

UnitedHealth, Humana, Elevance Health, and CVS saw the biggest stock declines.