UnitedHealth Plunges After Guidance, Medicare Hit!

UnitedHealth Plunges After Guidance, Medicare Hit!

Introduction

UnitedHealth Group (UNH) experienced a sharp selloff this week after quarterly results and policy developments combined to materially alter near-term revenue visibility. Investors reacted to a one-time restructuring charge tied to prior operational issues and to a Centers for Medicare & Medicaid Services (CMS) proposal that would effectively freeze Medicare Advantage payment growth for 2027. These are concrete developments that changed the company’s immediate earnings outlook and drove significant market volatility.

What moved UNH stock this week

Earnings, guidance and the restructuring charge

UnitedHealth reported fourth-quarter adjusted EPS of about $2.11 on roughly $113.2 billion in revenue. While the headline numbers were near expectations, management issued weaker 2026 revenue guidance—around $439 billion—below many analysts’ forecasts near $454 billion. The print also included a one-time restructuring and related charge of roughly $1.6 billion tied to fallout from the Change Healthcare incident, layoffs and other strategic adjustments. Taken together, the charge and softer guidance punctured investor confidence and trimmed near-term profit expectations.

CMS proposal hits Medicare Advantage profitability

The administration’s draft reimbursement proposal for Medicare Advantage for 2027 calls for an effective 0.09% increase—dramatically lower than the prior year’s 5.06% uplift and well under street expectations of several percentage points. The proposal also moves to curb certain risk-adjustment practices that had supported Medicare Advantage revenue growth. Because Medicare Advantage is a high-margin, high-growth part of UnitedHealth’s business, the proposed changes represent a direct regulatory headwind to future revenue and margins.

Broader market impact: Dow pressure

UNH is a heavy-weight on the Dow Jones Industrial Average. The combination of weak guidance and the CMS proposal contributed to a roughly 400-point drop in the Dow on the day of the announcements, with UNH among the key drivers of that decline. The insurer’s selloff—on the order of mid-to-high double digits intraday—amplified sector-wide selling in healthcare stocks.

Investor implications and strategic outlook

Near-term earnings pressure

The immediate takeaway is reduced near-term earnings visibility. Investors should adjust models to reflect the restructuring charge and a more conservative revenue path for 2026. With the CMS final rule not due until April, there is a short window where expectations could shift, but current consensus assumptions will likely need revision.

Regulatory risk to Medicare Advantage

The CMS proposal signals tougher scrutiny on Medicare Advantage reimbursement and risk adjustment. If finalized in similar form, insurers will face pressure to cut benefits or absorb lower margins, which would weigh on long-term growth assumptions for UNH’s Medicare Advantage business.

Optum and Change Healthcare effects

Optum’s integration and the lingering impacts from the Change Healthcare cyberincident remain visible in one-time charges and operational realignment. While Optum is a strategic growth engine for UnitedHealth, these near-term disruptions highlight execution and legal/regulatory drag that investors must monitor.

Conclusion

This week’s developments are substantive and immediate: a known restructuring cost hitting the income statement and a CMS policy proposal that curbs Medicare Advantage reimbursement growth. Both items directly affect UnitedHealth’s earnings outlook and were the primary catalysts for the sharp share-price move and Dow weakness. Investors should recalibrate valuation assumptions, particularly around Medicare Advantage margins and the timing of Optum’s recovery from Change Healthcare-related issues.