UnitedHealth (NYSE:UNH) investors have endured a rough 2025, with the stock down by 31% year-to-date. The downbeat performance has been on account of several setbacks, including underwhelming quarterly results, a leadership change, higher expenses related to UHC’s Medicare Advantage members, and a federal probe into its Medicare Advantage risk-coding practices.
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The stock, however, was trending up 9% in Tuesday’s session, after the healthcare giant released an update on its Medicare Advantage Star ratings. Specifically, UNH reported that it had received preliminary Medicare Advantage Star ratings data from CMS for the 2027 payment year (2026 Star year). The company said it expects about 78% of its members to be enrolled in plans rated four stars or higher. UNH added that these figures are in line with its past performance, though the results are still being reviewed and are not yet final.
Given the outcome, J.P. Morgan analyst Lisa Gill thinks it’s no wonder investors reacted positively.
“This is consistent with UNH’s 2026 star enrollment by our estimates, and importantly, is likely better than some investors feared (we had heard concerns that UNH could slip to 55%-60% of membership in 4 Star plans),” Gill noted.
Gill has long emphasized that investor concerns around the 2027 Star ratings – which are tied to UNH’s margin recovery outlook – and the 2026 Medicare Advantage bids, where UNH plans to exit products covering roughly 600,000 members, are “key factors” some investors would need in order to “warm to the story.” As such, the analyst believes the latest update should be seen as a positive step.
Since nearly all MCOs (managed care organizations) are aiming to improve MA margins in 2026 and 2027, Star ratings remain a critical factor that could disrupt those efforts. While Gill notes it’s still unclear whether UNH’s performance reflects genuinely stronger scores or simply “cutpoint favorability” (or both), there’s no indication of a “material upward shift” in cutpoints, which would otherwise have created another headwind.
“We expect as we progress closer to early October we will hear more on cutpoints, shaping sentiment for MCOs, especially for those with large MA books,” the analyst added.
As for what to do with the stock, Gill’s stance offers something of a conundrum at the moment. On the one hand, the analyst rates the shares as Overweight (i.e., Buy). That said, her $310 price target implies the shares are now overvalued by 11%. (To watch Gill’s track record, click here)
The Street’s general take offers a similar contradiction; while 17 Buys against 2 Holds and 1 Sell add up to a Strong Buy consensus view, the $317.80 average price target suggests the stock has overshot by 9%. With this in mind, keep an eye out for either price target hikes or rating downgrades shortly. (See UNH stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.