Zacks Industry Outlook Features UnitedHealth, The Cigna, Humana, and Centene

Press Release

Chicago, IL – March 12, 2026 – Zacks Equity Research has released an analysis focusing on Universal Health Services, Inc. (UHS). Despite facing industry challenges, major HMO providers such as UnitedHealth Group Inc. (UNH), The Cigna Group (CI), Humana Inc. (HUM), and Centene Corp. (CNC) continue to demonstrate resilience.

Industry Focus: HMO

Current State of the HMO Sector

The U.S. Health Maintenance Organization (HMO) sector is actively embracing digital advancements and pursuing mergers and acquisitions to enhance their service offerings, reach new markets, and grow their membership. With the Federal Reserve enacting three interest rate reductions in 2025 and borrowing costs expected to stay low, insurers may find it easier to fund acquisitions, potentially accelerating industry consolidation. However, regulatory shifts could restrict Medicaid eligibility and decrease ACA enrollments, impacting both membership numbers and reimbursement rates.

Healthcare costs are climbing due to the return of postponed treatments, increased management of chronic illnesses, and the rising prices of specialty medications such as biologics and cancer therapies. These financial pressures are affecting not only HMOs but also companies across the broader medical sector, including Universal Health Services, Inc.. Despite these obstacles, leading HMO firms like UnitedHealth Group Inc., The Cigna Group, Humana Inc., and Centene Corp. are well-positioned to navigate these headwinds.

Industry Overview

The Zacks HMO industry encompasses both private and public organizations that provide essential and supplemental healthcare services to subscribers. These companies primarily assume insurance risk and set premiums for health and medical policies, while also offering administrative and managed-care services for self-insured plans.

Typically, services are delivered through a network of approved providers, including primary care doctors, clinics, hospitals, and specialists. Exceptions for out-of-network care are generally limited to emergencies or special circumstances. Health plans can be accessed via private purchase, social insurance, or government welfare programs.

Key Trends Shaping the HMO Industry

• Rising Healthcare Costs:

  U.S. health insurers are experiencing increased expenses due to the resumption of delayed medical procedures, higher demand for routine screenings, and ongoing management of chronic diseases. The use of costly prescription drugs is also driving up claims. Demographic changes, such as an aging population, and the growing prevalence of chronic conditions like diabetes and heart disease, are further escalating long-term costs. As a result, insurers are seeing tighter profit margins as their Health Benefit Ratios come under pressure.

• Regulatory Challenges:

  Insurers are facing a complex regulatory environment. Proposed legislation, such as the One Big Beautiful Bill Act, could introduce new Medicaid work requirements, stricter eligibility checks, and reduced federal support for certain programs. These changes may lead to lower enrollment and reduced reimbursements, especially for Medicaid and Medicare plans. As commercial insurance products tend to be more profitable, insurers are increasingly focusing on expanding these offerings. However, anticipated increases in Medicare Advantage rates in 2026 may provide some relief.

• Shortage of Healthcare Workers:

  A nationwide deficit of nurses and other medical professionals is putting pressure on hospitals, particularly as patient numbers rise. Factors such as an aging workforce, burnout, and uneven staff distribution are contributing to this shortage. HMOs collaborate closely with healthcare providers to ensure members receive timely and cost-effective care. Maintaining service quality is essential for customer satisfaction and retention, but a shrinking nursing workforce could impact hospitals' ability to deliver high-quality care, affecting HMO membership renewal rates.

• Focus on Mergers and Acquisitions:

  In addition to adopting new technologies, HMOs are actively pursuing mergers and acquisitions to expand their capabilities, enter new markets, and strengthen their presence nationwide. These strategies help companies diversify and maintain a competitive edge. With borrowing costs expected to decrease following recent interest rate cuts, M&A activity is likely to increase as financing becomes more accessible.

Zacks Industry Rank: A Cautious Outlook

The Zacks Industry Rank—an average of the Zacks Rank for all member stocks—suggests muted short-term prospects for the Medical-HMOs industry, which currently ranks #224 out of 243 industries, placing it in the lowest 8%.

Historically, industries in the top half of Zacks' rankings outperform those in the bottom half by more than two to one. The current low ranking reflects a generally negative earnings outlook for companies in this sector.

Despite these headwinds, there are select stocks within the industry that may be worth holding due to their strong growth initiatives. Before highlighting these, let's review recent market performance and valuation metrics.

Industry Performance vs. S&P 500 and Medical Sector

Over the past year, the Zacks Medical-HMO industry has dropped 35.6%, while the S&P 500 composite gained 24.4%. The broader Zacks Medical sector saw a modest increase of 1.6% during the same period.

Valuation Snapshot

Based on the forward 12-month price-to-earnings (P/E) ratio—a common metric for medical stocks—the industry is currently valued at 13.71x, compared to 22.01x for the S&P 500 and 20.66x for the medical sector. Over the past five years, the industry's P/E has ranged from a low of 11.58x to a high of 19.57x, with a median of 16.19x.

Four HMO Stocks to Monitor

Here are four HMO stocks, each holding a Zacks Rank #3 (Hold), that may be well-suited for long-term growth in the current environment:

• UnitedHealth Group:

  Based in Minnesota, UnitedHealth Group's revenue is bolstered by the strong performance of its UnitedHealthcare and Optum divisions. UnitedHealthcare continues to expand its membership and premium revenues through enhanced Medicare and Medicaid offerings, while Optum's growth is driven by acquisitions and advanced data-driven healthcare solutions. The Zacks Consensus Estimate projects UnitedHealth Group's 2026 earnings at $17.70 per share, an 8.3% increase from the previous year. The company has exceeded earnings expectations in two of the last four quarters, with an average negative surprise of 2.38%.

• Cigna:

  Headquartered in Connecticut, Cigna benefits from the robust performance of its Evernorth and Cigna Healthcare platforms. Evernorth excels in specialty pharmacy services, while Cigna Healthcare serves a broad customer base across government and commercial segments. Strategic acquisitions and partnerships continue to drive growth. The Zacks Consensus Estimate for Cigna's 2026 earnings stands at $30.29 per share, reflecting a 1.5% year-over-year increase. Cigna has surpassed earnings estimates in each of the last four quarters, with an average surprise of 2.67%.

• Humana:

  Kentucky-based Humana has maintained steady growth, supported by rising premium revenues and a strong Medicare and Medicaid membership base. The company has secured new contracts and renewals with federal and state agencies, and its CenterWell brand focuses on the healthcare needs of seniors. Recent acquisitions include Family Physicians Group, iCare, and Inclusa. The Zacks Consensus Estimate for Humana's 2026 earnings is $9.82 per share, with projected 2026 revenues up 22.8% from 2025. Humana beat earnings estimates in three of the last four quarters, averaging a 6.96% positive surprise.

• Centene:

  Missouri-based Centene's growth is fueled by strong Medicare and Medicaid performance, leading to more contracts and a growing membership. The company's focus on Medicare Advantage plans for seniors continues to drive demand. Centene pursues growth through acquisitions and partnerships, expanding its capabilities and national presence. The Zacks Consensus Estimate for Centene's 2026 earnings is $3.01 per share, a 44.7% increase from the prior year. Centene exceeded earnings expectations in three of the last four quarters, with an average beat of 60.56%.

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• UnitedHealth Group Incorporated (UNH): Free Stock Analysis Report
• Universal Health Services, Inc. (UHS): Free Stock Analysis Report
• Humana Inc. (HUM): Free Stock Analysis Report
• Cigna Group (CI): Free Stock Analysis Report
• Centene Corporation (CNC): Free Stock Analysis Report

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