Health insurers expect 78% of Medicare Advantage members to be in top-rated plans. UnitedHealth Group shares surged on Tuesday, making the health insurer the best-performing stock on both the Dow Jones Industrial Average and the S&P 500, after the company projected that the majority of its Medicare Advantage members will qualify for federal quality bonus payments.

In a regulatory filing, UnitedHealth Group said its internal review of preliminary ratings by the Centers for Medicare & Medicaid Services (CMS) indicated that about 78% of its Medicare Advantage members are expected to be enrolled in plans rated four stars or higher for 2025. These ratings are not yet final but align with the company’s historical performance, according to the filing.

The announcement sent shares climbing nearly 9% in recent trading. Despite the rebound, UnitedHealth’s stock remains down around 30% since the beginning of the year.

Medicare Advantage a Key Driver of Investor Confidence

The Medicare Advantage program, which allows private insurers to administer Medicare benefits, has been at the center of UnitedHealth’s volatile year. Earlier in April, the company’s shares suffered their steepest single-day decline in more than two decades after UnitedHealth lowered its full-year earnings guidance. The company cited “heightened care activity indications” within its Medicare Advantage operations as the reason behind the adjustment.

The health care sector, and UnitedHealth in particular, has also been under increased scrutiny due to growing concerns over high medical and prescription drug costs. Against that backdrop, the latest update reassured investors that UnitedHealth’s Medicare Advantage business remains resilient.

Plans rated four stars or higher by CMS are eligible for federal quality bonus payments. Insurers can use these funds to reduce premiums, add extra benefits, or reinvest in services for their members. According to estimates by the Kaiser Family Foundation, CMS will distribute approximately $12.7 billion in bonus payments to Medicare Advantage plans in 2025.

UnitedHealth’s forecasted enrollment is slightly above the broader market average. In 2025, about 75% of Medicare Advantage enrollees nationwide are expected to be in plans rated four stars or higher, putting UnitedHealth’s projected 78% share ahead of the industry benchmark.

Long-Term Challenges Still Remain

While the favorable ratings outlook provides a near-term boost, UnitedHealth continues to face long-term headwinds. The sharp decline in stock value earlier this year underscored investor unease about rising medical utilization and costs, which could pressure profit margins across the industry.

Moreover, heightened public concern about affordability and access to care may continue to put pressure on private insurers, potentially prompting further policy and regulatory scrutiny. Lawmakers and advocacy groups have increasingly questioned the sustainability of Medicare Advantage spending, particularly as enrollment in the program continues to climb nationwide.

Still, analysts note that UnitedHealth remains the largest Medicare Advantage provider in the United States and is well positioned to benefit from quality bonus payments if CMS confirms its strong star ratings later this year.

The company’s stock rebound on Tuesday highlighted how closely investor sentiment is tied to Medicare Advantage performance. Strong star ratings not only bolster UnitedHealth’s financial outlook but also reinforce its ability to compete effectively in a growing market.

With federal bonus payments expected to play a significant role in 2025 revenues, UnitedHealth’s projection of 78% of members in top-rated plans may help restore some investor confidence after months of volatility. However, whether this momentum can be sustained will depend on finalized CMS ratings and how effectively the company navigates rising health care costs and regulatory challenges in the year ahead.

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