Health insurer stocks take a hit as Medicare Advantage rates fall short of expectations

On Monday, the Centers for Medicare and Medicaid Services announced that government payments to Medicare Advantage plans would rise by 3.7% year over year. However, this increase was not enough for insurers, particularly those heavily reliant on private Medicare plans. On Tuesday, shares of U.S. health insurers saw a decline after the Biden administration did not increase payments as much as expected.

Insurance companies such as CVS Health, UnitedHealth Group, Elevance Health, Centene, and Humana were affected by this decision. Humana was hit particularly hard as it heavily depends on private Medicare plans known as Medicare Advantage. The company has faced high medical costs and challenges following a cyberattack on UnitedHealth Group’s tech unit.

The Medicare Advantage business has traditionally been a source of growth and profits for the insurance industry. More than half of Medicare beneficiaries are enrolled in these plans due to their lower monthly premiums and added benefits not covered by traditional Medicare. The rate set by the federal agency determines how much insurers can charge for premiums, plan benefits, and ultimately their profits. Unfortunately, the current rate remains unchanged from an earlier proposal in January, which is not typical as the agency usually increases the rate after the initial proposal.

Overall, this decision by the Centers for Medicare and Medicaid Services has put additional pressure on insurers already facing high medical costs and challenges following a cyberattack on UnitedHealth Group’s tech unit.

By Sophia Gonzalez

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