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US health insurance stocks plunged on Tuesday after the Trump administration said it would throttle spending on a popular government-funded scheme for older Americans.
UnitedHealth and Humana, the largest providers of government-subsidised insurance plans known as Medicare Advantage schemes, shed around a fifth of their market value on Tuesday.
The rout comes after the Centers for Medicare and Medicaid Services said late on Monday that it planned to increase certain 2027 payments to companies that provide coverage for seniors and people with disabilities by only 0.09 per cent — or about $700mn. CMS had approved a 5 per cent rate increase for the insurance companies for 2026.
The CMS proposal marks the latest time in recent weeks that the Trump administration has sent shockwaves through markets with its policy plans. Earlier this month, a plan to block institutional investors from buying single-family homes shook shares in big landlords, while many bankers balked at the president’s call to cap credit card interest rates.
Medicare Advantage is lucrative for the insurance industry: insurers were paid nearly $540bn by the US government in 2025 to run the subsidised insurance plans, according to a congressional report.
“The insurers are facing a tough political climate, which is atypical of a Republican regime,” said analysts at Oppenheimer. “Inflation has been trending above historical levels for multiple years and the [Medicare] rate updates have significantly lagged that trend.”
Humana shares were down by 20 per cent in afternoon trading in New York, while UnitedHealth was down 19 per cent. Aetna owner CVS Health fell 13 per cent even as analysts cautioned that the rate was just a proposal and might rise before it is finalised in April.
CMS’s announcement heaped more problems on UnitedHealth, which reported financial results on Tuesday. The Minneapolis-based company warned that revenue would fall for the first time in at least three decades.
UnitedHealth, which provided cover for 9.9mn people on the Advantage plans last year, is particularly exposed to certain plans within Medicare, according to KFF, a non-profit health policy research group. The Medicare Advantage healthcare scheme, a privately managed alternative to traditional government-administered healthcare, provides coverage for more than 34mn elderly Americans and people with disabilities.
“The UnitedHealth recovery story continues to be choppy, with the recent announcement from CMS complicating the longer-term recovery story, in our view, for UnitedHealth and more broadly across the industry,” said analysts at JPMorgan.
On a Tuesday call with analysts, UnitedHealth executive Tim Noel acknowledged that the CMS announcement was “disappointing”. The company’s shares have dropped 47 per cent over the past 12 months.
Last May, the company removed chief executive Andrew Witty and brought back its longtime CEO Stephen Hemsley in a bid to revive its fortunes.
It also acknowledged a justice department criminal investigation related to its Medicare billing programme. In December 2024, company executive Brian Thompson was shot dead in a targeted killing. The suspect, Luigi Mangione, is expected to go on trial later this year.
UnitedHealth also reported its profits dropped 41 per cent to $19bn last year, after its bottom line was hit by $1.6bn in restructuring costs tied to a cyber attack.
“We grow increasingly concerned about UnitedHealth’s fundamental story as the narrative becomes more complicated,” analysts at Baird wrote on Tuesday. “Why is UnitedHealth suddenly booking cyber attack charges again in the fourth quarter [of 2025]?”