Economy

Health Insurer Shares Drop After CMS Proposes Flat Rates and UnitedHealth Issues Soft Guidance

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Jan 27, 2026

THE BARE STORY

Shares of major U.S. health insurance companies fell sharply on Tuesday following a federal proposal for lower-than-expected Medicare Advantage payment rates and a weak revenue forecast from UnitedHealth Group. In early trading, Humana stock plunged approximately 20%, while UnitedHealth dropped more than 19%. Other industry players, including CVS Health, Elevance Health, and Centene, also recorded double-digit declines.

The sell-off was triggered by a proposal released Monday by the Centers for Medicare & Medicaid Services (CMS), which outlined a net average payment increase of just 0.09% for Medicare Advantage plans in 2027. This figure fell significantly short of the 4% to 6% increase anticipated by analysts. CMS Administrator Dr. Mehmet Oz stated that the proposed policies are designed to update risk adjustments and enhance payment accuracy, ensuring that taxpayer funds target actual health needs.

Compounding the sector's decline, UnitedHealth Group reported fourth-quarter revenue of $113.2 billion, missing analyst expectations. The company also issued guidance projecting a 2% year-over-year revenue decline for 2026, forecasting a total exceeding $439 billion. UnitedHealth CFO Wayne DeVeydt noted this is the first time in a decade the company has guided for a revenue drop. DeVeydt attributed the outlook to international divestitures, a projected loss of over 3 million U.S. members, and a $6 billion impact from transitioning to Medicare's new coding system.

UnitedHealth is currently executing a turnaround plan aimed at restoring profitability through measures such as raising prices, cutting benefits, and shrinking membership. Meanwhile, the CMS is expected to finalize the Medicare Advantage rates in early April. If the current proposal is adopted, the agency estimates it would result in over $700 million in additional payments to plans in 2027.

Same Facts. Different Perspectives.

Two AI models. Two viewpoints. One factual foundation.

Perspective by Claude

• Focus on payment accuracy and taxpayer protection CMS Administrator Dr. Mehmet Oz stated that the proposed policies are specifically designed to enhance the accuracy of payments. The objective is to update risk adjustments to ensure that taxpayer funds are effectively targeted toward actual health needs rather than administrative inefficiencies.

• Proposal represents a net increase in spending Despite the lower-than-expected percentage growth, the agency estimates that the new rates will still result in increased overall funding. If the current proposal is adopted, CMS projects it would generate over $700 million in additional payments to Medicare Advantage plans in 2027.

• Implementation of necessary policy updates The proposal outlines changes intended to update risk adjustments and modernize the payment structure. These adjustments are part of the agency's broader effort to refine how Medicare Advantage plans are compensated, which industry figures note involves transitioning to a new coding system.

How it may affect me

As a U.S. reader: You may need to switch insurance providers if you are among the more than 3 million U.S. members UnitedHealth projects losing as it attempts to stabilize its finances.

Policyholders could face higher prices and reduced benefits as insurers execute turnaround plans to restore profitability in response to tighter federal payment proposals.

Investors holding stocks in major health insurers like Humana and UnitedHealth may see immediate portfolio declines following the sharp double-digit sell-off triggered by the news.

Taxpayers may see federal funds directed more specifically toward actual health needs if the CMS finalizes its proposal to update risk adjustments and enhance payment accuracy.

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