Piper Sandler: UnitedHealth Group Incorporated (UNH.US) is the "last survivor" in the health insurance rate storm, but the overall industry risk is worsening.

Senior research analyst Jessica Tassan of Piper Sandler stated that in a challenging Medicare Advantage rate environment, UnitedHealth Group Incorporated (UNH.US) is the strongest company in terms of coping ability. The core reasons include the company's large-scale infrastructure, deep value-based healthcare business heritage, and strategic commitment to the core business of federal health insurance. This assessment was made after the Centers for Medicare and Medicaid Services released the 2027 estimated rate notice. The notice shows that the expected average revenue change is almost flat, at only 0.09%, a significant decrease compared to the approximately 5% increase in 2026. It is understood that due to the current high medical inflation rate, this nearly flat rate actually constitutes significant profit pressure. At the same time, the government plans to tighten budgets by cracking down on "upcoding" practices, leading to an expected reduction of over $7 billion in revenue for the entire insurance industry by 2027, triggering a sharp sell-off in the capital markets. In response to this impact, UnitedHealth Group Incorporated's stock price plummeted on January 27, 2026, with a drop of nearly 20% at one point, ultimately closing down 19.61%, marking a record decline in market value. During the interview, Tassan elaborated on the core profit model of the health insurance industry and the challenges it currently faces. She stated, "These rates currently cannot keep up with the continuing trend of rising costs." She further pointed out that the utilization rate and unit cost of health insurance are increasing at high single-digit or even double-digit rates. This has led to a situation described by Tassan as "the gap between the rewards you get and the payment you ultimately have to bear as a payer is widening." Despite facing many unfavorable factors, Tassan emphasized that UnitedHealth Group Incorporated will not withdraw from the federal health insurance business. After all, this business accounts for about two-thirds of the premium revenue the company receives through Medicare Advantage plans, Dual-Eligible Special Needs Plans (DSNP), Part D prescription drug plans, and MedSup plans. "It can even be said that, given its scale, infrastructure, and resources, they are the most capable of withstanding this challenging rate environment." she said. The analyst particularly highlighted the advantage of UnitedHealth Group Incorporated in terms of infrastructure, especially emphasizing its large-scale value-based healthcare business. She said, "The scale infrastructure that UnitedHealth Group Incorporated has, specifically referring to its large value-based healthcare business, makes it more resilient to risk in a difficult rate environment compared to most other Medicare Advantage organization (MAO)s." In addition, Tassan described the Medicare Advantage plan as "a highly meaningful and valuable noble cause." She mentioned that by 2025, it is expected that 34 million elderly people will choose this plan. However, she also pointed out the hidden broader risks. She stated that the current challenging rate situation is "a risk for the entire industry, and ultimately for beneficiaries, not just for UnitedHealth Group Incorporated. After all, the plan has a good track record in improving medical effectiveness and promoting the accessibility of healthcare services. Looking ahead, based on recent claims data analysis, Tassan believes that there is a possibility of rate increases when the final rates are announced in April. However, if the final rates still do not meet demand and remain inadequate, she expects Medicare Advantage organizations to further cut benefits, or even withdraw from certain regional markets - if so, this will be the second consecutive year that the industry has seen an overall reduction in scale.