On Tuesday, shares of U.S. health insurers saw a decline after the Biden administration did not raise payments for private Medicare plans as much as the insurance industry and investors had anticipated. CVS Health, UnitedHealth Group, Elevance Health, Centene, and Humana all experienced drops in their stock prices as a result.
The Centers for Medicare and Medicaid Services (CMS) revealed that government payments to Medicare Advantage plans are slated to increase by only 3.7% year over year, which is actually a slight decrease after accounting for certain assumptions. This final rate remains unchanged from a previous proposal in January and plays a critical role in determining premiums, plan benefits, and ultimately, insurer profits.
Humana, in particular, relies heavily on private Medicare plans known as Medicare Advantage for its revenues. The news is especially disappointing for this type of business as it has been a key driver of growth and profits for the insurance sector.
This announcement comes at a time when insurers are already facing challenges with rising medical costs and uncertainty around claims processing following the cyberattack on UnitedHealth Group’s technology unit. The news is especially disappointing for Medicare Advantage businesses, which have been a key driver of growth and profits for the insurance sector.
