UnitedHealth expects some membership contraction in 2026 and noted that CMS’s Medicare rate “simply doesn’t reflect the reality.”
- The company said that, due to elevated trends and funding cuts, it plans to contract some Medicare Advantage membership in 2026.
- Piper Sandler said that it recognises that the 2027 Advance Notice suggests persistent funding headwinds in Medicare Advantage.
- CMS said that its proposed policies are projected to result in a net average year-over-year payment increase of 0.09% for Medicare Advantage plans in the calendar year 2027.
UnitedHealth Group Inc. shares plunged nearly 20% on Tuesday, posting their worst single-day decline in more than nine months, after the stock fell to $282.70, its lowest level in over six months. The sharp selloff followed a weaker-than-expected outlook from the company and news that the Centers for Medicare & Medicaid Services plans to keep Medicare Advantage payment rates largely flat for 2027.
Commenting on the development, UnitedHealthcare CEO Tim Noel said the Advance Notice released on Monday fails to account for current cost pressures. Looking ahead to 2027, Noel said the proposal “simply doesn’t reflect the reality of medical utilization and cost trends.”
“We will continue to work with CMS to ensure an appropriate final growth rate calculation to avoid a profoundly negative impact on seniors’ benefits and access to care,” Noel added during a post-earnings call.
CMS said that its proposed policies are projected to result in a net average year-over-year payment increase of 0.09% for Medicare Advantage plans in the calendar year 2027.
Wall Street View
On Tuesday, Piper Sandler lowered its price target on UnitedHealth to $396 from $417, which still implies a nearly 40% upside from the last close, and maintained an ‘Overweight’ rating, according to The Fly, driven by in-line 2025 adjusted earnings per share and solid 2026 guidance.
Piper Sandler said it recognises that the 2027 Advance Notice suggests persistent funding headwinds in Medicare Advantage, but believes UnitedHealth will take the necessary action to preserve Medicare Advantage margins in the absence of a positive revision in the April Rate Announcement.
The firm said that it remains very confident in CEO Stephen Hemsley’s ability to optimize margins at UnitedHealthcare and restore profitability within Optum Health’s VBC businesses. Piper Sandler added that it would be a buyer on the stock selloff resulting from the medicare rate announcement.
Deutsche Bank said that the effective growth rate reflecting underlying cost trends is mostly in line with expectations, but the risk model change and coding change were not expected.
UNH’s Medicare Advantage
The company said that, due to elevated trends and funding cuts, it plans to contract some Medicare Advantage membership in 2026. Noel said that the UnitedHealthcare Medicare Advantage shrinkage will be in the range of 1.3 million to 1.4 million members for the full year, including group, individual, and dual special needs plans.
“These are greater losses than originally anticipated as competitive market dynamics drove higher than expected planned shopping during the intensely competitive annual enrollment period,” he said. “Our 2026 approach favored margin recovery, and these membership trends are a result of these actions.”
How Are Stocktwits Users Reacting?
Retail sentiment on UnitedHealth has turned ‘extremely bullish’, from ‘bullish’ a week ago, with message volumes at ‘extremely high’ levels, according to data from Stocktwits.
In the last 24 hours, retail message volume about UnitedHealth on Stocktwits surged 260%, and the ticker saw a 2% spike in followers.
Major U.S. health insurer stocks fell steeply during Tuesday’s trading after the plans to keep medicare payments flat next year, with Cantor Fitzgerald noting that these stocks should see a materially negative reaction.
Shares of UnitedHealth declined 47% in the last 12 months, while CVS Health stock jumped 27% and Humana shares declined 29% during the same period.
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