UnitedHealth Cuts Medicare Advantage Plans Amid Cost Pressures

UnitedHealth Group Inc. (UNH) is scaling back parts of its Medicare Advantage (MA) business for 2027 due to rising medical costs and utilization pressures. The company plans to discontinue plans covering about 390,000 members next year, reflecting a more selective approach to improve profitability. UnitedHealthcare will exit locations with a higher concentration of preferred provider organization (PPO) plans, which often carry higher costs.

The strategy aligns with broader industry trends, as insurers prioritize plan-level profitability over maximizing enrollment. UnitedHealthcare aims to reduce exposure to less profitable plans while investing nearly $1.5 billion in AI-related initiatives in 2026 to boost productivity. The company is also shifting toward narrower-network offerings, with 66% of members expected to have access to both health maintenance organization (HMO) and PPO plans in 2027, down from 70% in 2026.

This move could lead to some members switching to competitors, but UnitedHealth believes prioritizing sustainable margins will support its earnings recovery. The MA market continues to face cost and reimbursement challenges, and tighter plan selection may help build a healthier membership mix. Major competitors like Humana Inc. (HUM) and Centene Corporation (CNC) are also adjusting their MA portfolios for 2027, focusing on profitability and value-based care.

Shares of UNH have gained 32.2% over the past six months, outpacing the industry's rise of 32.1%. The company trades at a forward price-to-earnings ratio of 16.98, above the industry average of 14.93. The Zacks Consensus Estimate for UnitedHealth’s 2026 earnings is $19.85 per share, implying 21.4% growth from the previous year.