The Dow Jones Industrial Average fell 400 points on Monday, pulled down by a heavy drop in UnitedHealth Group shares after the Trump administration announced a tiny pay raise for Medicare Advantage plans in 2026. This news hit health insurers hard, with UnitedHealth, Humana, and CVS Health stocks each down more than 9% in after-hours trading. The market reaction came as traders digested details from the Centers for Medicare and Medicaid Services, led by Mehmet Oz, on payments that fell far short of expectations.
Background
Medicare Advantage plans serve millions of older Americans through private insurers that manage government-funded health coverage. These plans have grown fast in recent years, covering over half of Medicare enrollees. Insurers code patient illnesses to get payments from the government, and changes to those rules affect their profits.
Wall Street had hoped for payment increases of 4% to 6% for 2026. Instead, the Trump administration set an average rise of less than 0.1%. This low figure stems from a key measure of Medicare spending that came in below what experts predicted. The Centers for Medicare and Medicaid Services also proposed tighter rules on how insurers report patient conditions, which could squeeze profits further.
This move fits into broader efforts by the administration to control federal health spending. Medicare Part B premiums, which cover doctor visits, will rise to $202.90 a month in 2026, up $17.90 from 2025. The annual deductible goes to $283, up $26. Officials say action on skin substitute spending helped limit the premium hike; without it, the increase would have been about $11 more per month.
Health insurers like UnitedHealth have built big businesses around Medicare Advantage. UnitedHealth alone has millions of enrollees in these plans. A small pay raise means less money coming in while costs for patient care keep climbing. Past years saw bigger boosts, but recent rules have already cut into industry margins.
Key Details
UnitedHealth shares led the decline, dropping sharply and dragging the Dow lower. The broader market held up better, with many stocks ending flat or slightly down. Insurers faced the brunt because Medicare Advantage makes up a large part of their revenue.
Payment and Premium Changes
The less than 0.1% average increase applies across Medicare Advantage plans for next year. Analysts point to lower-than-expected spending data as the main reason. CMS also plans to limit coding practices that insurers use to boost payments for enrollees' health issues.
Medicare Part B changes affect everyone on original Medicare:
- Standard premium: $202.90 monthly (up from $185)
- Annual deductible: $283 (up from $257)
High-income earners face extra surcharges. For those with individual income over $109,000 up to $137,000, the premium jumps to $284.10. At the top end, over $500,000 individual income means $689.90 monthly.
Part D drug plans see a deductible rise and an out-of-pocket cap of $2,100 in 2026, up from $2,000. Medicare Advantage out-of-pocket limits drop slightly to $9,250 from $9,350.
"The proposed changes to coding will lead to pushback from insurers who say their margins are already under pressure." – Industry analyst speaking on background.
UnitedHealth reported earnings recently, but the Medicare news overshadowed them. The company has faced higher medical costs lately, and this payment freeze adds to the strain. Humana and CVS, which run big Medicare plans through Aetna, saw similar drops.
Trading volume spiked in health stocks as investors sold off. The Dow's 400-point slip equals about 1%, while the S&P 500 and Nasdaq ended with smaller losses. UPS shares fell on layoff news, but health insurers drove most of the Dow's pain.
What This Means
Seniors on Medicare Advantage may see plan changes as insurers adjust to flat payments. Some benefits could shrink, or premiums might rise to offset costs. Average out-of-pocket caps stay below the max, but individuals could face higher fees.
For investors, health stocks look shaky short-term. UnitedHealth, a Dow heavyweight, weighs heavy on the index. If coding rules tighten as proposed, profits could take a bigger hit over time. The industry has lobbied against past changes, and more fights lie ahead.
Broader markets shrugged off the news, showing strength in tech and other sectors. Medicare spending controls aim to save billions; CMS says cuts to skin substitutes alone prevent larger premium hikes. Retirees get a Social Security cost-of-living adjustment that covers most of the Part B increase, but it eats into about a third of the average raise.
High-income beneficiaries pay more through income-related surcharges. Part D adds its own fees from $14.50 to $91 monthly based on earnings. Drug price negotiations for 10 medicines start this year, expected to save Medicare $6 billion if applied retroactively to 2023 levels.
Insurers must now plan for leaner 2026 budgets. UnitedHealth and peers may cut costs or shift focus to other lines like employer plans. Wall Street will watch CMS final rules closely; any easing could lift stocks. For now, the market signals worry over squeezed health care profits amid government belt-tightening.
