Investing.com -- U.S. health insurers slid on Tuesday after the Trump administration proposed a much lower-than-anticipated increase to payments from next year’s Medicare Advantage plans.
As of 14:36 GMT (09:36 ET), Humana Inc slumped the most, 19.1%, followed by Unitedhealth Group) falling as much as 18.6%.
Elevance Health) was 10.8% lower after the opening bell, while CVS Health Corp) fell 8.9%, Centene Corp) lost 4.9%, and Molina Healthcare Inc (NYSE:MOH) was down 3.8%.
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Medicare Advantage (MA) plans are offered by private companies that bundle services provided by Original Medicaid such as hospital insurance, medical insurance, and coverage for drugs. Each year, the payment rates under these plans are updated. For 2027, the Centers for Medicare & Medicaid Services (CMS) has proposed increasing payment rates by 0.09%, or over $700 million in payments.
“What was supposed to be a positive catalyst for the group proved to be negative given unexpected regulatory changes that hit MA risk scores materially. As a result, MA rates for 2027 are only expected to increase +0.09%, well below the Street’s expectations of ~+5.0%, driven by a lower-than-expected effective growth rate and changes to the way MA plans are allowed to risk-code,” Truist analysts led by David MacDonald said in a research note.
According to the CMS, their proposed figure reflected various elements that impact Medicare Advantage payments such as the pace of underlying costs, 2026 star ratings for 2027 quality bonus payments, and risk adjustment updates.
“While this is only the Advance Notice and is subject to change until the Final Announcement in April, this is below our and Street expectations and we believe the implementation of the rule will likely result in a delay of the embedded earnings story for companies with meaningful exposure to MA including HUM, UNH, and CVS,” Mizuho analysts Ann Hynes and Jack Sheehan said in a research note.
The Truist analysts expressed confidence that the final rate announcement could see an improvement, adding that they remained broadly bullish on the managed player space. They reiterated their Buy ratings on CNC, CVS, ELV, UNH and maintained their Hold ratings on HUM and MOH.
