Morgan Stanley: UNH as CVS of 2026?
Morgan Stanley: Could UNH Become 2026’s CVS?
Morgan Stanley analysts are questioning whether UnitedHealth Group (UNH) might evolve into what CVS represents in 2026. They point to recent strategic moves that demonstrate a strong commitment to improving profit margins, even if it means slower membership expansion in key areas.
Following two challenging years marked by higher-than-expected healthcare utilization and the implementation of the v28 risk adjustment model, UnitedHealth has taken decisive action. The company is actively repricing its plans and scaling back benefit generosity across multiple product lines to restore financial stability.
Specifically, UnitedHealth anticipates a reduction of approximately one million Medicare Advantage enrollees in 2026. This figure could rise further depending on the outcomes of their detailed proprietary evaluations of plan benefits and profitability.
This tactical shift closely resembles the approach CVS adopted during its 2025 Annual Enrollment Period (AEP). Like CVS, UnitedHealth is placing profitability ahead of aggressive growth, a move that Morgan Stanley regards positively as a path to sustainable earnings.
The investment bank projects that UnitedHealth’s Medicare Advantage segment margins will rebound to between 2% and 3% in 2026. This improvement aligns closely with the company’s stated long-term aspirations of 2% to 4% margins for the business line.
Additionally, Morgan Stanley has upgraded its overall outlook for the Medicare Advantage market. They cite a more supportive final rate notice from regulators and a potentially less stringent oversight environment, both of which could aid leading players in achieving healthier margins.
A central question in investor discussions, according to the firm, revolves around pricing expectations. While the market appears to grasp the broad recovery narrative outlined by UnitedHealth’s leadership, it might be undervaluing the depth and breadth of the benefit adjustments planned for 2026 offerings.
UnitedHealth’s stock has surged 38% from its August lows this year, prompting some skeptics to question whether the turnaround thesis still holds room for upside. Full clarity on these changes won’t emerge until Annual Enrollment Period outcomes are published alongside Centers for Medicare & Medicaid Services data in February.
Morgan Stanley emphasized that UnitedHealth’s benefit trims surpass national benchmarks in various plans, with especially significant reductions in Medicare Advantage PPO products. This supports the company’s goal of minimizing participation in underperforming segments.
The strategy also incorporates raising maximum out-of-pocket thresholds and increasing member cost-sharing requirements for services covered under Medicare, further bolstering the economic model.
