UnitedHealth Faces Historic Stock Drop After CMS Rate Proposal

UnitedHealth Group, Inc. (NYSE: UNH) suffered a significant decline in its stock price on January 10, 2026, with shares plummeting by nearly 20% in a single trading day. The dramatic downturn followed the release of a disappointing fourth-quarter earnings report and a concerning rate proposal for Medicare by the Centers for Medicare & Medicaid Services (CMS) for 2027.

Impact of CMS Rate Proposal

The catalyst for this market rout was the CMS’s Advance Notice for 2027, which proposed a net payment increase of only 0.09%. This figure fell far short of analyst expectations that ranged from 4% to 6%. In an environment where medical inflation is currently estimated between 7% and 10%, the proposed rate is perceived as a substantial budget cut, raising alarms among health insurers.

During the fourth-quarter earnings call, Timothy Noel, CEO of UnitedHealthcare, expressed concerns about the CMS notice, calling it a failure to acknowledge the “reality of medical utilization and cost trends.” He emphasized the need for a more favorable final growth rate to prevent “a profoundly negative impact on seniors’ benefits and access to care.” Noel described the potential outcomes as “deeply unfortunate,” highlighting the ongoing funding pressures that the program faces.

Financial Struggles and Membership Losses

The earnings call unveiled additional challenges for UnitedHealth. The company reported that its Medical Care Ratio (MCR) surged close to 90%, meaning nearly 90 cents of every premium dollar is being spent on medical claims. This increase is largely attributed to rising utilization of behavioral health services and specialty drugs.

While adjusted earnings met expectations, generally accepted accounting principles (GAAP) earnings for the fourth quarter of 2025 collapsed by almost 100%, dropping to just one cent per share. This decline was primarily due to restructuring charges and ongoing costs related to a cyberattack in 2024.

Moreover, UnitedHealth anticipates losing up to 1.4 million Medicare Advantage members in 2026 as the company shifts its focus towards maintaining profit margins rather than pursuing growth.

Stephen Hemsley, CEO of UnitedHealth, addressed the implications of the CMS’s rate proposal, stating it “will mean very meaningful benefit reductions” across the healthcare sector, not limited to UnitedHealth. He warned that seniors across the industry would face reduced choices, limited access, and affordability issues as a result of these changes.

The sentiment within the healthcare insurance market was reflected in the stock performance of other insurers. On the same day, shares of CVS Health Corp. (NYSE: CVS) and Humana, Inc. (NYSE: HUM) fell by 14% and 19%, respectively. By the afternoon, UnitedHealth’s stock was trading down 19.80% at $282, according to data from Benzinga Pro.

The repercussions of this rate proposal from CMS will likely extend beyond UnitedHealth, impacting seniors’ healthcare access and benefits across the broader industry landscape.