UnitedHealth Group (NYSE: UNH) shares plunged 16% in pre-market trading after federal regulators announced lower-than-expected Medicare Advantage payment increases.

The Centers for Medicare & Medicaid Services said Medicare Advantage rates would rise just 0.09% in 2027, far below expectations of increases of up to 6%, triggering a broad selloff across managed care stocks.

UnitedHealth reported fourth-quarter adjusted earnings of $2.11 per share, slightly above analyst estimates of $2.10. Despite the earnings beat, investors focused on a rising medical care ratio, which increased to 88.9% from 85.5%, reflecting lower Medicare funding and higher utilization.

The company forecast 2026 adjusted earnings per share of more than $17.75, only marginally above the analyst consensus of $17.74. The modest guidance did little to ease concerns about the earnings impact of restrained Medicare reimbursement growth.

UnitedHealth shares were already down roughly 35% in 2025, as investors remained cautious about healthcare cost inflation and ongoing regulatory pressures across the managed care sector.