UnitedHealth Group (UNH +3.99%) announced its 2025 full-year and fourth-quarter results on Tuesday, Jan. 27, 2026. Despite reporting better-than-expected earnings, UnitedHealth's stock plummeted 20%.
With this latest decline, UnitedHealth Group's share price is now down more than 50% from its late 2024 peak. Should you buy the healthcare stock after its steep sell-off?
NYSE: UNH
Key Data Points
Why did UnitedHealth Group stock plunge?
Although UnitedHealth Group's revenue guidance for 2026 fell short of Wall Street's expectations, its sharp share price decline wasn't solely due to its Q4 update. Instead, the plunge stemmed primarily from the Centers for Medicare & Medicaid Services (CMS) issuing a proposal to increase 2027 Medicare Advantage rates by only 0.09%, roughly the same as 2026 rates. Analysts anticipated a 4% to 6% rate increase.
This CMS announcement didn't only impact UnitedHealth Group. Several other health insurance stocks sank on the news. For example. Humana's (HUM 6.70%) shares dropped 22%, while CVS Health's (CVS +2.82%) stock tumbled nearly 14%.
Still, UnitedHealth Group would be hit hard by the proposed Medicare Advantage rates. The company's UnitedHealthcare unit ranks as the largest Medicare health insurer based on membership.
Timothy Noel, CEO of UnitedHealthcare, said during the Q4 earnings call that the CMS rates don't "reflect the reality of medical utilization and cost trends." Noel also stated that the proposal would result in significant benefit reduction and that UnitedHealthcare will "need to take a hard look at our geographic footprint, our product footprint, across the country."
Image source: Getty Images.
Will UnitedHealth Group bounce back?
UnitedHealth Group's shares bounced back modestly during early trading on Wednesday, Jan. 28, 2026. Will this rebound continue? I think so.
For one thing, the initial sell-off was arguably overdone. Medicare Advantage accounts for about 15% of UnitedHealthcare's total medical membership. While the proposed CMS rates would no doubt hurt UnitedHealth financially, the impact wouldn't be enough to wipe out 20% of the company's valuation.
Also, the proposed CMS rates won't be finalized until the spring. Morningstar (MORN +0.63%) equity research analyst Julie Utterback noted, "CMS already foreshadowed a potential 2.5% increase from this initial draft, due to expected billing trends not yet included." Although a 2.5% increase in 2027 Medicare Advantage rates would still be below the initial range analysts expected, it would be better news for UnitedHealth Group than a 0.9% increase.
Before the latest CMS proposal, UnitedHealth Group projected relatively modest growth in 2026, followed by low double-digit earnings growth in 2027 and a return to historical growth levels in 2028. When asked about this outlook in the Q4 earnings call, CEO Stephen Hemsley replied that he "can't speak to '27" but believes the company can still deliver long-term growth rates of 13% to 16%.
Hemsley's probably right, in my opinion. If so, buying UnitedHealth Group stock after its steep sell-off could pay off handsomely over the long term.
