Many people hate health insurance. And yet, historically, it has been one of the most profitable sectors to invest in, due to strong spending in the industry and overall growth in health care costs in the United States. As the population grows, this will increase exponentially.
Over the past two years, investors have been hesitant to invest in health insurance stocks due to volatile political rhetoric and unexpected increases in claims costs. Bellwethers in the industry, like him UnitedHealth Group (NYSE: UNH)they’re down 50% from their highs, and the sentiment couldn’t be worse in this sector.
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That is an opportunity for investors who focus on buying stocks for the long term. Here’s why investors should buy health insurance stocks before they come back in style in 2026.
The aforementioned UnitedHealth Group is the largest health insurance company by revenue, reporting $448 billion in 2025. It operates as an integrated player directly providing health insurance and its health care clinics through Optum, and has its own pharmacy benefits manager arm. Some say this could put the business at risk due to antitrust claims, but historically it has been very profitable, with revenue growing steadily year after year until 2024.
Over the past few years, UnitedHealth’s earnings have been hurt by cyberattacks, low-quality adjustments to things like Medicare Advantage, rising costs, and its decision to write down asset prices.
Most important to UnitedHealth is its ability to manage health insurance rates relative to industry average costs. It got some good news recently, with Medicare Advantage regulators allowing higher rate increases through 2027 than previously expected. It all comes back to UnitedHealth Group’s medical loss ratio, an industry term that determines how much premiums are paid as claims over a period of time.
Last year, UnitedHealth’s medical loss ratio was 88.9%, up from 85.5% in 2024, which is why revenue fell 41% year over year to $19 billion. The stock still trades at a below-market price-to-earnings (P/E) ratio of 23.5, but this should drop quickly if the medical loss ratio improves through 2026 and beyond, making UnitedHealth Group a good stock to buy during this market frenzy.
If you prefer to bypass the incumbents in favor of the disruptors, Oscar Health (NYSE: OSCR) may be of interest to you at these prices. It is a health insurance company and very cheap like UnitedHealth Group, but it is attacking the market in a completely different way.
Oscar Health targets individual health insurance payers, meaning people who use the Affordable Care Act (ACA) marketplace. In addition to this focus, Oscar Health uses modern technology to make the customer experience as pleasant as possible when dealing with a health care problem. For example, it provides health services to all members at no extra charge.
At the beginning of 2026, Oscar Health reported that 3.4 million people enrolled in health insurance products during open enrollment. It had less than 1 million members at the end of 2021. This is a remarkable development at a time of great uncertainty in the ACA market, as funding became a political football last year.
The medical loss ratio is also a problem for Oscar Health’s profitability, reaching 87.4% in 2025 due to unexpected health care claims. However, as the company normalizes prices in 2026 and capitalizes on large scale, it expects to generate operating income of $250 million to $450 million this year. That looks like a bargain for a stock with a market cap of $4.3 billion as of this writing.
Health insurance is a good industry to explore because health care costs are often rising due to improvements in health care, economic growth, and the aging of the US population. In 1970, $74 billion was spent on health care annually in the United States. By 2024, that had grown to $5.3 trillion, and it shows no signs of slowing down.
Most of this spending will flow into the various health insurance sectors. As long as these businesses can manage their costs well, they should be profitable stocks to buy and hold for the long term.
Before buying stock in Oscar Health, consider the following:
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Brett Schafer has no position in any of the stocks mentioned. The Motley Fool recommends UnitedHealth Group. The Motley Fool has a policy of disclosure.
The Great Rotation: Buy This Sector Before It Comes Back in Style was originally published by The Motley Fool.
