UnitedHealth Group Incorporated UNH is facing sustained margin pressure within its Medicare Advantage (MA) business as medical costs continue to trend higher. Elevated utilization, driven by a return of patients seeking delayed care, has pushed claims upward, tightening profitability despite steady premium inflows.
This pressure is evident in UNH’s medical care ratio, which has climbed from 83.2% in 2023 to 85.5% in 2024 and further to 89.1% in 2025. The steady increase signals that a larger share of premium revenues is being consumed by medical expenses, leaving less room for margin expansion and making earnings more sensitive to reimbursement shifts.
However, relief comes from the latest move by the Centers for Medicare and Medicaid Services (CMS), which finalized Medicare Advantage payment rates for 2027 at an average increase of 2.48%, sharply above the 0.09% proposed in January. CMS also indicated that the revision could result in more than $13 billion in additional payments to MA plans, materially improving the sector’s revenue outlook.
For UNH, this rate revision provides a timely buffer. While utilization pressures are unlikely to ease immediately, the improved reimbursement framework helps offset rising claims and stabilizes near-term margins. More broadly, it supports a more balanced outlook for Medicare Advantage insurers navigating a high-cost environment. In 2025, the company’s MA membership rose 7.6% year over year, and a more predictable funding backdrop should help sustain this momentum by enabling competitive benefit offerings and strengthening member retention in an increasingly competitive MA landscape.
How Are Competitors Faring?
Some of UNH’s major competitors in the healthcare service provider space are Humana Inc. HUM and Centene Corporation CNC.
The CMS rate hike is a clear tailwind for Humana, given its significant exposure to Medicare Advantage. Improved reimbursement helps offset cost pressures and Star Ratings drag, supporting margin recovery while allowing HUM to remain competitive on benefits and sustain membership growth.
For Centene, the CMS revision provides modest support as its MA exposure is smaller. The improved rate environment helps cushion CNC’s elevated cost trends, but the impact is less pronounced, with broader performance still driven by its Medicaid and Marketplace businesses.
UnitedHealth’s Price Performance, Valuation & Estimates
Shares of UNH have declined 48.8% in the past year compared with the industry’s fall of 43.5%.
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From a valuation standpoint, UnitedHealth trades at a forward price-to-earnings ratio of 16.79, above the industry average of 14.33. UNH carries a Value Score of B.
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The Zacks Consensus Estimate for UnitedHealth’s 2026 earnings is pegged at $17.66 per share, implying 8% growth from the year-ago period.
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UNH stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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