UnitedHealth After the Crash: The 3 Paths From Here
UnitedHealth fell almost 20% in a single day.
Why the Stock Dropped
This wasn’t about one issue. Two things hit at the same time.
First: the earnings headline.
UnitedHealth reported very low GAAP earnings and guided to lower revenue next year.
Most trading systems don’t read context. They see “lower revenue” and “no profit” and sell.
Second: the government headline.
The night before earnings, the US government proposed a 0.09% increase in Medicare Advantage rates for 2027.
With inflation running closer to 3–4%, that effectively means getting paid less in real terms.
Put together, the message the market heard was simple:
Revenue down
Profits under pressure
Government pushing back
That combination spooked investors.
What Was Actually Going On in the Quarter
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The quarter looked bad on paper, but most of the damage was intentional.
Management took a large one-time charge to deal with existing issues:
Costs from the cyberattack
Closing weaker parts of the business
Cutting underperforming teams and contracts
They chose to deal with these problems now instead of letting them linger.
When you adjust for that, earnings were $2.11 per share, ahead of expectations. The business continued to generate strong cash. The headline numbers just didn’t show it.
Shrinking on Purpose
This is the part that really unsettled the market.
For the first time in years, UnitedHealth is planning to get smaller.
2025 revenue: about $448 billion
2026 guidance: about $440 billion
This is deliberate.
Management expects to lose:
Around 1.3–1.4 million Medicare members
Around 700,000 Medicaid members
These are members that were costing more than they were paying in.
Revenue goes down. Profitability improves.
Instead of chasing size, the company is focusing on margins and control. That usually looks uncomfortable at first.
The Government Question
The biggest unknown is still the government.
Medicare is expensive, and the US is trying to slow cost growth. The message from regulators is essentially:
“We’re not increasing payments. Become more efficient.”
If rates stay tight, insurers reduce extra benefits like dental, vision, and gym memberships. That affects real people.
UnitedHealth covers roughly 8.4 million seniors under Medicare.
Cutting benefits at that scale creates political pressure, especially going into an election year. The final decision hasn’t been made yet.
How AI Fits Into This
AI wasn’t mentioned as a buzzword. It was mentioned as a cost tool.
UnitedHealth plans to spend around $1.5 billion per year on AI, with the goal of saving roughly $1 billion per year starting in 2026.
Where that shows up:
Call centres: AI helps staff find information faster
Claims: more decisions handled automatically, with fewer manual steps
If revenue growth slows, lowering costs becomes the main lever. This is how they do that at scale.
Cash Tells a Different Story
While reported earnings were close to zero, cash flow was not.
UnitedHealth generated about $19.7 billion in operating cash flow over the year.
Earnings can be shaped by accounting choices. Cash reflects what the business actually produces.
Management plans to focus on paying down debt in early 2026. After that, they expect to restart share buybacks later in the year.
That matters more than short-term headlines.
Short-Term Issues vs. Long-Term Ones
It helps to separate what’s temporary from what really matters.
Short-term pressures:
Higher medical usage
Strong flu seasons
Temporary cost spikes
These come and go, and are already factored into future pricing.
Long-term pressure:
Government reimbursement levels
That’s the real debate. It may cap growth and force efficiency, but it doesn’t mean the business stops working.
Management described 2026 as a year to fix things, with expectations of returning to more normal growth in 2027 or 2028.
Looking Ahead: The Possible Paths
Everything from here depends on one thing:
The government’s final Medicare rate decision in April 2026.
From that point, the business likely follows one of three paths.
2026: A Year of Adjustment
This part is fairly clear, based on management guidance.
Revenue comes down slightly as unprofitable members are removed.
Costs improve.
Cash flow remains strong.
Buybacks return in the second half of the year.
Despite lower revenue, earnings still grow because margins improve.
Scenario A
Trigger:
The government raises Medicare Advantage rates to around +1.5% to avoid large benefit cuts for seniors.
Result:
UnitedHealth stops shrinking. Membership stabilises. Share buybacks accelerate in 2027.
Numbers:
2027 revenue: approximately $465 billion
2027 earnings per share: approximately $20.50
Stock implication:
At a normal valuation, the stock could recover to $430 or higher by 2027.
Scenario B
The government makes a small concession, around +0.5%.
Result:
UnitedHealth continues to shrink slightly for another year but protects margins through cost controls and AI efficiency.
Numbers:
2027 revenue: approximately $450 billion
2027 earnings per share: approximately $19.75, largely driven by buybacks
Stock implication:
The stock likely moves gradually higher into the $355–$375 range.
Scenario C
The government keeps rates near the original 0.09% proposal.
Result:
Benefits are reduced further, membership declines again, and revenue remains under pressure.
Protection:
Even in this case, UnitedHealth is expected to generate around $18 billion in annual cash flow.
Stock implication:
That level of cash generation should limit downside, with the stock likely trading in the $295–$315 range rather than breaking down.
Summary
The short-term outcome depends on regulation, not demand.
The downside is supported by strong cash generation. The upside depends on how quickly the government eases pressure on the system.
The market is currently focused on the worst-case outcome. The next 12–18 months will show which path becomes reality.
Disclaimer: This is not financial advice. Investing involves risk.