UnitedHealth Group (UNH) shares suffered a sharp selloff, plunging nearly 19% to around $282.70, as investors reacted to intensifying concerns over Medicare Advantage profitability and rising medical costs. UnitedHealth Group Incorporated (UNH) closed at $282.70, down $68.94 (19.61%) at the end of the trading session at 4:00:02 PM EST. The Jefferies cut its price target on UNH to $340 from $418.
The selloff was not isolated to UnitedHealth alone. Shares of Humana (HUM) dropped roughly 21%, while Elevance Health (ELV) fell about 14%. However, as the largest U.S. health insurer by market capitalization, UnitedHealth’s decline carried particular weight, wiping out tens of billions in market value in a single session.
Medicare Advantage: A Real-Dollar Cut in Disguise
At the center of the downgrade is the Centers for Medicare & Medicaid Services (CMS) proposal for 2027 Medicare Advantage advance rates, which calls for an increase of just 0.09%. While technically positive, analysts widely view the proposal as a real-dollar cut once medical cost inflation is taken into account.
The rising utilization, higher drug costs, and persistent labor inflation mean insurers will likely face margin compression under the new framework. When adjusted for healthcare inflation, the proposed CMS rate effectively reduces reimbursement,” the analysts noted, making it increasingly difficult for insurers to maintain profitability without scaling back benefits or absorbing higher costs.
The Medical Care Ratio Crisis Deepens
Another major concern driving the UNH stock plunge is the company’s Medical Care Ratio (MCR), a key metric that measures how much premium revenue is spent on patient care. UnitedHealth reported an MCR range of 88.9% to as high as 91.5% in the fourth quarter of 2025, well above its long-term target of approximately 88.8%.
A higher MCR indicates that UnitedHealth is spending more on medical services than anticipated, directly eroding operating margins. The analysts warn that elevated MCR levels may persist longer than previously expected, particularly within the Medicare Advantage population, where utilization trends remain volatile.
Despite these pressures, UnitedHealth’s diversified business model continues to provide some cushion. For the full-year 2025, UnitedHealth Group reported revenues of $447.6 billion, up 12% year over year, with earnings of $13.23 per share and adjusted earnings of $16.35 per share
Jefferies Stays Bullish: A Contrarian Signal?
Notably, despite slashing its price target, Jefferies maintained a “Buy” rating on UNH stock. At current levels near $282, the shares trade well below the firm’s revised $340 target, suggesting what Jefferies describes as potential undervaluation for long-term investors willing to weather near-term volatility.
For full-year 2026, UnitedHealth Group expects revenue of more than $439.0 billion, with earnings projected above $17.10 per share and adjusted earnings exceeding $17.75 per share. For now, UNH stock sits at the intersection of policy uncertainty, cost inflation, and valuation debate, making it one of the most closely watched names in the healthcare sector.
