Medicare News Sinks Health Insurers

January 27, 2026

The large health insurance stocks are down big today, after some bad news for companies with large Medicare Advantage (MA) plans.  The three big MA players are UnitedHealth (UNH), CVS (Aetna), and Humana (HUM).  UnitedHealth (UNH) is currently down 19%!

What happened?  Last night, the govn announced an increase of just 0.09% in the re-payment rate for Medicare Advantage medical costs.  This compares to average medical cost increases of 9%ish per year.  Wall Street was looking for a 4-6% increase. 

I wont get into the guts of Medicare here.  The punchline is this: for “Medicare Advantage” (MA) plans, the insurance company pays the medical costs, and the govn reimburses the insurance company.  So, the insurance companies try to make a profit on the difference.  And the govn said it will keep repayment levels unchanged, despite rising medical costs.  So the insurance co’s are getting squeezed. 

CMS Administrator Dr. Oz said the proposal will force “risk adjustments” at the insurance companies and make them more efficient.  He and President Trump have long said that insurance companies should “make less”.   Well, this proposal will certainly do that!  So, the stocks are suffering as a result.

However, it’s a bit of a political gamble for the White House.  The insurance companies will respond by threatening Medicare Advantage members with higher premiums and fewer benefits.  Medicare Advantage plans have been growing in popularity, due to the inclusion of dental, vision, hearing, as well as prescription drug coverage (Part D).  As such, Medicare Advantage plans are now 54% of all Medicare plans.  So it is a large and politically powerful group.  And needless to say, those members vote religiously.  So this might not be the final word on the matter.

Separately, UNH reported 4Q earnings last night. The stock today will be driven solely by the govn rate announcement.  But the results and full-year guidance were essentially inline.  As a reminder, the company had the worst year of its life in 2025, as a result of payments related to a cyberattack, rising cost ratios, and regulatory scrutiny on their Medicare billing practices.   UNH is the largest health insurer and still the 31^st largest stock in the index.