What happened

Shares of Tivity Health Inc. (NASDAQ:TVTY), the health and fitness program provider most famous for the SilverSneakers brand are getting decimated on Monday. Investors are jumping ship in response to an announcement by UnitedHealth Group Inc. (NYSE:UNH) that suggests the giant insurer will no longer be a big client and instead become a major competitive threat.

The stock has fallen about 32.6% as of 1:29 p.m. EST on Monday.

So what

Tivity Health's core contract with UnitedHealth Group expires this year, and Monday's announcement suggests the country's largest private insurer is going to integrate the fitness benefit it had previously outsourced to Tivity Health. When the company reported third-quarter earnings a couple weeks ago it boasted that 14.5 million Americans were eligible to participate in its SilverSneakers brand fitness program, but that figure will probably be reduced by a significant figure when the company reports again.

Upset person looking at their laptop.

Image source: Getty Images.

The flagship fitness program for older adults is offered at around 14,000 of 16,000 locations within the company's network of participating fitness centers. Insurers typically offer access to the flagship program as a value-added service for their Medicare Advantage members. In the new year, though, UnitedHealth Group will offer its own service, to be named Optum Fitness Advantage, to people enrolled in its Medicare Advantage plans across 11 states.

Now what

About 24% of all Medicare Advantage enrollees this year have a UnitedHealth Group plan, and Humana boasts a 17% share. These two clients were responsible for a combined 36% of Tivity's total revenue last year.

Humana's contract with Tivity doesn't expire until 2020, and it's important to note that UnitedHealth Group is rolling out its competing fitness benefit in just 11 states next year. Investors will want to watch the program closely for signs of success that could lead to a nationwide rollout, and perhaps incite Humana to follow suit in a few years.

Cory Renauer has no position in any of the stocks mentioned. The Motley Fool recommends UnitedHealth Group. The Motley Fool has a disclosure policy.