UnitedHealth Shares Crash After Medicare Payment Shock

UnitedHealth Group, the nation’s largest private health insurer, faced a dramatic reckoning this week as its stock plummeted and the company signaled its first revenue decline in decades. The sell-off, which wiped out nearly $60 billion in market value, was triggered by a confluence of disappointing government policy, rising medical costs, and a sobering financial outlook that sent shockwaves through the broader healthcare sector and Wall Street alike.

On January 27, 2026, UnitedHealth shares fell as much as 19% to $282.45, marking the steepest single-day drop since April of the previous year, according to Reuters. The stock is now trading nearly 50% below its 52-week high, a staggering reversal for a company long considered a pillar of stability in the healthcare industry, as reported by INDmoney. The Dow Jones Industrial Average and other major indexes also felt the impact, with UnitedHealth’s slump contributing to a 0.5% loss, or roughly 250 points, for the Dow, according to Investor’s Business Daily.

The immediate catalyst for this rout was the Centers for Medicare & Medicaid Services’ (CMS) proposed payment update for Medicare Advantage plans. The government agency announced on January 26 that payment rates for these plans would rise by just 0.09% in 2027—far below Wall Street’s expectations of up to 6%. This near-flat increase sent shares of UnitedHealth and other major insurers like Humana, Centene, Elevance Health, and CVS Health tumbling by as much as 20% in some cases. As Reuters explained, the proposal “starts to bring in worries about 2027 earnings growth” and casts doubt on whether health insurers can continue to meet analysts’ profit expectations.

Medicare Advantage is not a side business for UnitedHealth; it’s one of the company’s largest and most profitable segments. Even minor changes in reimbursement rates can have an outsized impact on future earnings. Tim Noel, CEO of UnitedHealthcare’s insurance unit, called the proposed rate “disappointing,” adding, “We will need very meaningful benefit reductions and to take a hard look at our geographic and product footprint, likely similar to what played out for 2026.”

The regulatory shock landed just as UnitedHealth released its fourth-quarter and full-year financial results. For the fourth quarter of 2025, UnitedHealth posted revenue of $113.2 billion, up 12.3% from $100.81 billion a year earlier, according to LSEG data referenced by CNBC. However, net income plunged to just $10 million, or $0.01 per share, compared to $5.54 billion, or $5.98 per share, in the same quarter of 2024. Adjusted earnings per share came in at $2.11, a steep 69% drop from $6.81 the year before. The company also took a one-time charge of $1.6 billion after taxes, primarily related to restructuring and costs from a massive cyberattack on its Change Healthcare unit.

Yet, the biggest concern for investors wasn’t the past quarter’s results, but the guidance for the year ahead. UnitedHealth forecast that 2026 revenue would exceed $439 billion—a 2% year-over-year decline and well below the $454.6 billion analysts had been expecting. This marks the first time since 1989 that the company has projected a revenue drop, a fact underscored by CFO Wayne DeVeydt, who told CNBC, “It’s the first time in a decade that UnitedHealth Group has had declining revenue.” He attributed the decline to three main factors: significant divestitures (including operations in the UK and South America), a projected membership decline of over 3 million, and a $6 billion revenue hit from Medicare’s new V28 coding system, which changes how patient diagnoses are weighted and reduces payments to insurers.

CEO Steve Hemsley, who returned to the helm after the ouster of Andrew Witty, sought to reassure stakeholders. “Momentum inside this organization is palpable. We still have work to do over the next several months, but I’m very pleased with the performance and outlook we have,” he said, according to Reuters. Hemsley emphasized a renewed focus on financial discipline and streamlined operations, promising a turnaround even as UnitedHealth braces for its first revenue decline in decades.

Despite the gloomy revenue outlook, UnitedHealth is targeting a return to growth in 2026, projecting annual profit per share of greater than $17.75, just above the analyst consensus of $17.74. The company reported 2025 adjusted earnings of $16.35 per share. Still, the medical care ratio—the percentage of premiums spent on medical care—remains a concern. UnitedHealth expects this ratio to be about 88.8% in 2026, compared to 88.9% in 2025 and 85.5% in 2024. Higher ratios reflect the ongoing challenge of rising medical costs, driven by increased utilization, more expensive treatments, and surging demand for specialty and behavioral care.

“While policy headlines grab attention, the more persistent issue sits beneath the surface: medical costs are rising faster than insurers would like,” INDmoney noted. The company faces a tricky balancing act: raising premiums risks losing members, cutting benefits could provoke regulatory or customer backlash, and simply absorbing costs would mean lower margins. None of these options are particularly attractive, and investors know it.

Regulatory scrutiny has also intensified. Over the past year, UnitedHealth has been under the microscope for its Medicare Advantage billing and risk-adjustment practices. Senate reports and ongoing regulatory reviews have added another layer of uncertainty, weighing on the company’s valuation. Persistent regulatory attention, even without formal penalties, introduces unknowns that markets tend to dislike almost as much as bad news itself.

The broader industry felt the tremors as well. Shares of CVS Health dropped 10%, while Humana plunged 20% to a low not seen since 2017. The ripple effects extended to the Dow Jones, which trimmed losses to 0.5% by late morning on January 27, according to Investor’s Business Daily. The sell-off underscored just how interconnected the fortunes of major health insurers are with federal policy decisions and cost trends.

Looking ahead, the next few months will be crucial for UnitedHealth and its investors. The final Medicare Advantage payment rates, expected in April 2026, could provide some relief—or further disappointment. Investors will also be watching for any signs that cost trends are stabilizing or that the company’s new leadership team can deliver on its promised turnaround. As Morningstar analyst Julie Utterback put it, “Investors hoping for a quick turnaround may have to wait longer than hoped.”

For now, UnitedHealth’s story is a cautionary tale about the fragility of even the most stalwart companies in the face of policy shocks, rising costs, and shifting expectations. The coming year will test whether the company can regain its footing—or whether this week’s sell-off is just the beginning of a longer period of adjustment for the healthcare giant and its peers.