UnitedHealth's Strategic Shift: Can It Replicate CVS's Success in 2026?

The healthcare industry's focus on Medicare Advantage (MA) has intensified as companies grapple with margin pressures and regulatory shifts. UnitedHealth Group and CVS Health, two titans in the space, have adopted divergent strategies to navigate these challenges. While UnitedHealth is pivoting toward margin recovery by scaling back membership growth, CVS has already demonstrated progress in stabilizing its MA business. This analysis examines whether UnitedHealth's 2026 strategy can mirror CVS's success, drawing on recent financial performance and strategic adjustments.

UnitedHealth's Margin-First Approach

UnitedHealth Group has signaled a clear departure from its historical emphasis on MA enrollment expansion. In 2026, the company plans to reduce its MA membership by approximately 1 million members, a move aimed at stabilizing its financial margins. This contraction is driven by cuts to benefit richness, including higher out-of-pocket limits and cost-sharing for services, as well as exiting less profitable segments. UnitedHealth's management has outlined a path to restore margins to 2–4% by 2026, a range it considers sustainable amid elevated healthcare costs.

However, the company's Q3 2025 results highlight ongoing challenges. UnitedHealthcare's medical care ratio (MCR) rose to 89.9%, up from 85.2% in the prior year, reflecting higher medical costs outpacing premium growth. Despite a 16% year-over-year revenue increase to $87.1 billion, operating profit for the segment fell by 57% to $1.805 billion. These figures underscore the difficulty of balancing margin recovery with enrollment retention, particularly as the Inflation Reduction Act (IRA) and Biden-era Medicare funding cuts continue to strain cost structures.

CVS Health's Integrated Margin Recovery

CVS Health, meanwhile, has positioned itself as a model for MA margin recovery. The company's 2025 performance demonstrates tangible progress: its Health Care Benefits segment reported an 11.6% revenue increase in Q2 2025, driven by IRA-related Part D adjustments. Aetna's medical benefit ratio (MBR) improved to 89.9% in 2025, with full-year projections of 91%, signaling better control over medical costs. These improvements have enabled CVS to raise its 2025 adjusted earnings per share guidance to $6.30–$6.40 and forecast 2026 adjusted profit of $7.00–$7.20 per share.

CVS's success stems from its integrated business model, which leverages its pharmacy benefit manager (PBM) to reduce net prescription costs through formulary refinements and lower net prices. Analysts note that this approach has already driven margin expansion, with the company projecting total revenue of at least $400 billion in 2026. Unlike UnitedHealth's enrollment contraction, CVS has focused on optimizing existing operations rather than retrenching, a strategy that appears to align with investor expectations for long-term profitability.

Strategic Divergence and Comparative Outlook

The contrast between the two companies' strategies is stark. UnitedHealth's margin recovery hinges on reducing membership and benefit generosity, a tactic that risks alienating customers and potentially harming long-term growth. In contrast, CVS has prioritized operational efficiency and cost containment without sacrificing enrollment, leveraging its PBM and integrated care delivery to stabilize margins.

UnitedHealth's 2026 margin targets-aiming for 2.5–3% by year-end-remain below its long-term goal of 2–4%. This suggests that even with aggressive cost-cutting, the company may struggle to match the margin resilience demonstrated by CVS. Furthermore, UnitedHealth's Q3 2025 MCR of 89.9% indicates that medical cost trends remain a headwind, even as it adjusts pricing and networks.

CVS's ability to raise profit forecasts and exceed Wall Street estimates highlights the effectiveness of its margin recovery initiatives. Its focus on refining formularies and leveraging its PBM to reduce net drug costs has created a flywheel effect, where lower expenses directly boost profitability. UnitedHealth, by contrast, has yet to demonstrate a comparable mechanism for sustaining margin gains beyond enrollment reductions.

Conclusion: A Path Forward for UnitedHealth?

While UnitedHealth's strategic shift toward margin recovery is necessary, replicating CVS's success will require more than membership contraction. The company must address systemic cost drivers, such as medical inflation and IRA-related pressures, through innovations in care delivery or pricing models. Its reliance on benefit cuts and network narrowing may yield short-term stability but risks eroding customer loyalty and market share.

CVS's integrated approach-combining PBM expertise with MA operations-provides a blueprint for sustainable margin improvement. For UnitedHealth to close the gap, it must accelerate investments in AI-driven cost management and explore partnerships or acquisitions that enhance its ability to control medical costs. Until then, investors may view UnitedHealth's 2026 targets as aspirational rather than assured, while CVS's track record offers a stronger foundation for confidence.