Shares of UnitedHealth opened slightly lower in the wake of the downgrade. The insurer is scheduled to report its results Thursday, ahead of the market open. Analysts expect the insurer to post earnings of $1.09 per share on revenue of $31.99 billion, according to Thomson Reuters.
Leerink analyst Ana Gupte is more positive on UnitedHealth's outlook. She expects the insurer to earn $1.17 per share for the first quarter, eight cents above the consensus estimate.
"We see the quarter as a likely positive catalyst in particular for the diversified managed-care names, and while Medicaid may see pressure, expect investors to step in on any potential weakness," Gupte wrote in a research note.
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Gupte expects the major insurers will likely continue to be conservative in their outlook for 2014, but that their pricing strategies will allow them to achieve their earnings projections.
"Medicare-margin resilience is likely to be better than expected, aided by conservative pricing that looks to offset the Obamacare underfunding headwinds," she wrote.
Insurer stocks were strong performers in last year, as investors grew more comfortable with the transition to new health-reform measures. However, this month, the S&P 500 Managed Care sector is down more than 4 percent, after gaining nearly 30 percent over the last year. Citi's McDonald said he expects valuations for the group have now become expensive.
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"Over the course of 2014/2015, there isn't going to be a significant amount of earnings growth. So it seems that the only way United's stock can outperform is if there is meaningful multiple expansion," he said.
Investors have grown less enamored with the health-care sector overall this quarter, taking profits in insurers, hospital and biotech stocks. But Gene Peroni, a portfolio manager at Advisors Asset Management, said he expects the sector is likely to regain some of its momentum later in the year.
"We have to keep in mind, health care had a huge move last year, it was one of the top-performing sectors in the market and it got off to a pretty good start this year," Peroni said.
"We can make the case it was a little overvalued and got ahead of itself, but I can't make the case it is anything more than a healthy, somewhat rigorous, immediate correction," he said.
—By CNBC's Bertha Coombs.