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Health insurance stocks extended Monday’s gains into Tuesday after Medicare regulators finalized stronger-than-expected 2026 payment rates.
Humana (HUM-2.90%) jumped more than 9%, while UnitedHealth Group (UNH-1.96%) rose nearly 5% and CVS Health gained almost 6%. All three are major players in the Medicare Advantage market, a core revenue stream for insurers.
While many associate CVS with retail stores and extremely long receipts, its $78 billion acquisition of Aetna (CVS-0.37%) in 2018 made Medicare Advantage a major growth engine. CVS’ vertically integrated model now means CMS rate decisions ripple across its insurance, pharmacy, and clinic businesses.
Medicare’s final rule came in better than feared
The Centers for Medicare & Medicaid Services (CMS) announced Friday evening that Medicare Advantage plans will receive a 5.06% average increase in revenue next year, according to its 2026 Rate Announcement. The effective growth rate was also revised upward to 9.04%, a significant jump from the 5.93% proposed in the advance notice — offering a larger-than-expected boost for insurers.
The news landed just as markets were attempting to recover from last week’s brutal selloff, which was driven by newly announced Trump tariffs that rattled global markets. With Medicare Advantage now covering more than 33 million Americans, the stability of CMS’s 2026 payment guidance offered a rare moment of clarity amidst market turmoil.
Investors bet on healthcare to play defense
Despite the bounce, healthcare stocks remain down more than 5% year-to-date — but that compares favorably to the S&P 500’s 15% decline, reinforcing the sector’s appeal as a defensive play. With inflation still stubborn and rate cuts pushed further into the future, investors are rotating into sectors that offer steady cash flow and recession resilience.
The political spotlight on Medicare Advantage is intensifying, too. Just last week, the Senate confirmed Dr. Mehmet Oz as Administrator of CMS, putting him in charge of programs that insure roughly half the U.S. population. While the 2026 rate decision was finalized before his confirmation, Oz has previously suggested cutting Medicare and Medicaid and often endorsed private Medicare Advantage plans on his long-running television show.