Health insurance stocks poised for recovery in 2026 as UnitedHealth and Oscar Health show potential

Most people dislike health insurance, yet the sector has historically been profitable for investors due to the durability of industry spending and the long-term growth of U.S. healthcare expenditures. With the U.S. population aging, that trend is expected to persist.

Over the past two years, however, investor interest in health insurance stocks has cooled as political rhetoric shifted and claims costs rose unexpectedly. Major industry bellwethers have fallen sharply: UnitedHealth Group is down 50% from its highs, and sentiment toward the sector has deteriorated.

The behemoth in the space: UnitedHealth Group

UnitedHealth Group is the largest health insurance company by revenue, reporting $448 billion in 2025. The company operates as a vertically integrated provider, combining health insurance with its own healthcare clinics through Optum, and it also includes a pharmacy benefit manager arm.

UnitedHealth’s earnings have faced pressure in recent years from cyberattacks, lower rate adjustments for items such as Medicare Advantage, rising utilization rates, and asset value write-downs. A key factor for the business is its ability to manage health insurance pricing relative to industry-estimated costs.

Medical loss ratio and recent regulatory developments

Recent developments include Medicare Advantage regulators allowing higher rate increases in 2027 than previously expected. The company’s performance is closely tied to its medical loss ratio, which measures the share of premiums paid out as claims.

Last year, UnitedHealth’s medical loss ratio rose to 88.9%, from 85.5% in 2024. As a result, earnings fell 41% year over year to $19 billion. Despite the decline, the stock trades at a below-market price-to-earnings (P/E) ratio of 23.5. The article notes that the P/E could decline further if the medical loss ratio improves in 2026 and beyond.

A disruptive alternative: Oscar Health

For investors looking beyond established players, Oscar Health is presented as an alternative. Like UnitedHealth, Oscar Health has also declined significantly from recent highs, but it is pursuing a different approach.

Oscar Health focuses on individual health insurance customers, particularly people using the Affordable Care Act (ACA) marketplace. The company also emphasizes technology-driven customer experience, including telehealth services for all members at no additional charge.

Membership growth and profitability outlook

At the beginning of 2026, Oscar Health reported 3.4 million people enrolled in its health insurance products during open enrollment. The company had under 1 million members at the end of 2021, reflecting rapid growth amid uncertainty in the ACA marketplace, including changes in political support for subsidies.

Oscar Health’s medical loss ratio also weighed on profitability, reaching 87.4% in 2025 due to unexpected healthcare claims. The company expects that as it normalizes pricing in 2026 and gains greater scale, it will generate operating income of $250 million to $450 million in 2026. The article contrasts this outlook with a market capitalization of $4.3 billion as of the time of writing.

Why health insurance remains a long-term focus

The article argues that health insurance is a compelling industry to evaluate because healthcare spending tends to rise over time due to advances in medical care, economic growth, and the aging U.S. population. It cites that annual U.S. healthcare spending increased from $74 billion in 1970 to $5.3 trillion by 2024, with no sign of slowing.

Because much of that spending flows through health insurance ecosystems, the sector’s long-term investment case depends on whether insurers can manage costs effectively. If they do, the article suggests these businesses could remain profitable for long-term investors.