The health insurance sector suffered a sharp sell-off on Tuesday as shares of UnitedHealth Group (UNH) tumbled as the Trump administration proposed smaller-than-expected increases for Medicare Advantage plans through 2027.
In a report released late Monday by the Centers for Medicare and Medicaid Services (CMS), the government proposed that payment rates for Medicare Advantage plans, a private insurance plan, will increase by just 0.09% by 2027. Analysts expect growth to be as high as 6%.
UnitedHealth (UNH) is down nearly 20%, while other major insurers Elevance Health (ELV) and CVS (CVS) are both down about 14%.
The smaller-than-expected proposal comes at a time when insurers’ profit margins are already tight. When UNH reported earnings Tuesday morning, the company said its healthcare ratio was 89.1%. Other insurance companies have reported similar rates.
MCR is a key measure of the percentage of premium income policy members spend on medical claims and health care services. In UNH’s case, for every $1 the company earns from premiums collected from customers, it uses $0.89 to pay for medical expenses.
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UnitedHealth is the insurer most affected by the Medicare Advantage changes, accounting for about 30% of enrollees nationwide. Humana (HUM), which ranked second with about 17% of national enrollment, also plunged more than 20% on Tuesday.
The slight increase in premiums in 2027 follows a higher-than-expected 5.06% increase in premiums in 2026. Analysts at William Blair said final data for 2027 is expected to be finalized on or before April 6.
In a statement following the release of the CMS report, a spokesperson for insurance group AHIP said the proposal, if enacted, “could result in benefit cuts and cost increases for the 35 million seniors and people with disabilities who renew their Medicare Advantage coverage in October 2026.”
The proposal ‘represents an additional headwind’ [Medicare Advantage] William Blair analysts wrote in a note to clients issued Tuesday.
UnitedHealth, the largest U.S. insurance company, suffered a secondary blow on Tuesday morning when it reported lower-than-expected fourth-quarter and full-year 2025 revenue.
Fourth-quarter and full-year revenue were $113.2 billion and $447.6 billion, respectively, compared with expectations of $113.7 billion and $447.9 billion. Fourth-quarter and full-year revenue were both up 12% from the previous year.
