Health Insurers Master Cost Control as Stock Prices Soar

In this photo, traders work under monitors displaying CVS Health Corp. signage on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Friday, Oct. 27, 2017. CVS is the parent of Aetna, the nation’s third largest health insurance company. Photographer: Michael Nagle/Bloomberg

© 2017 Bloomberg Finance LP

Following a wave of strong health insurance company earnings reports this summer, stock prices are surging as medical costs appear to be under control for the moment.

For instance, UnitedHealth Group—the parent company of the nation’s largest health insurer, UnitedHealthcare—reported over $5 billion in second-quarter net income. This impressive figure came during a period when the company’s medical care ratio continued to decline.

The company stated that its second-quarter 2026 medical care ratio fell to 86.7% from 89.4% in the second quarter of 2025. This ratio, which represents the percentage of premium revenue spent on medical costs, decreased year-over-year due to benefit design, pricing discipline, member mix, and medical cost management initiatives.

UnitedHealth shares have hovered around $400 this week, representing an increase of more than 30% compared to a year ago. Similarly, shares of CVS Health, which owns the major health insurer Aetna, have risen by more than 30% since last summer.

CVS Health shares a similar profile to UnitedHealth, with diversified assets that include pharmacy benefit management and healthcare providers. Not long ago, Wall Street analysts speculated that the vertical integration strategies of both CVS and UnitedHealth would soon become obsolete. However, neither company has shown any signs of abandoning their strategy of owning both medical care providers and the health insurance operations that fund care.

Meanwhile, shares of other major health insurers, including Centene and Humana, have also experienced significant gains.

Centene’s share price has more than doubled over the past year, hovering around $65 this week after being near $30 last week. Meanwhile, Humana’s stock has climbed to over $380 a share, more than doubling its value from five months ago.

The strong performance of Centene, which reported over $1 billion in second-quarter net income, and Humana is particularly significant for the health insurance sector. This is because both companies offer a large volume of government-subsidized health insurance products and tend to cover patients with more complex, chronic conditions.

However, this improving cost outlook for health insurers comes with challenges for the policyholders covered by these plans.

Many of these insurers have already exited unprofitable markets or regions where they lack adequate doctor and hospital networks to deliver low-cost benefits. When insurers exit these markets, enrollees are forced to select a different plan during the fall open enrollment period, potentially losing access to their preferred physicians or hospitals.

During Humana’s second-quarter earnings call, executives announced that they will once again implement “targeted plan exits” for the 2027 health benefit year. While other companies have yet to confirm similar exits, industry analysts expect them given the ongoing struggle to manage costs.

“Our expected margin expansion in 2027 will benefit from our ongoing clinical excellence, operating efficiency, benefit adjustments, and targeted plan exits,” Humana Chief Financial Officer Celeste Mellet stated during the company’s second-quarter earnings call. “For 2027, we anticipate these plan exits will impact approximately 600,000 members, though we will actively work to recapture a significant portion of that volume, as we did in 2025.”

Not all health insurers are retreating from existing markets. For example, Oscar Health, which sells individual coverage under the Affordable Care Act (commonly known as Obamacare), has expanded into new markets this year and has been performing exceptionally well.

Oscar’s share price has tripled over the last six months, reaching nearly $32 per share in Monday afternoon trading on the New York Stock Exchange. In contrast, the stock was hovering around $11 per share as recently as March.

Oscar swung to a $361 million profit in the second quarter, surpassing $1 billion in net income for the first half of the year. This growth was driven by rising health plan membership and easing medical costs.

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