The stocks of several health insurance companies — including Humana, CVS Health, UnitedHealth and Elevance Health— took a hit during morning trading on Tuesday after federal regulators didn’t raise payments for Medicare plans above industry expectations.
The Centers for Medicare and Medicaid Services announced Monday that government payments to Medicare Advantage and Medicare Part D programs — Medicare insurance plans operated by private companies — will increase on average by 3.7%, or $16 billion, year-over-year in 2025. Analysts view the rate increase as an effective decline of 0.16%, according to the Wall Street Journal.
“CMS continues to take steps to maintain the stability of the Medicare Advantage and Part D prescription drug programs,” CMS Administrator Chiquita Brooks-LaSure said in a statement. She added that the new rates will “keep Medicare Advantage payments up-to-date and accurate.”
Stock in Humana, which is the nation’s second largest Medicare Advantage health insurer, was down 12% Tuesday morning.
UnitedHealth stock fell 6%, CVS Health shares slid 8%, Centene Corp. stock fell 5%, and Elevance Health stock dipped 4%.
The rate increase is the same as a rate proposal made in January. Over the past 10 years, final rates were not increased from their initial proposal only once, Bloomberg reports.
“If we saw no improvement in the final rate notice, that would be a meaningful difference obviously relative to what we expected,” Humana CFO Susan Diamond said during an investor call in March. She added that without a bigger increase it would be “challenging” for the company to reach its goal of boosting earnings by $6 to $10.
“I would argue definitely take the high end off the table,” she said.
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