Shares in major US health insurers have surged following the government’s announcement of a significant boost to Medicare Advantage payment rates for 2027.
The Centers for Medicare & Medicaid Services (CMS) revealed late on Monday that payments to private insurers offering Medicare Advantage plans will increase by an average of 2.48% in 2027. This figure represents a substantial rise from the initially proposed increase of just 0.09% in January, sparking optimism across the sector.
Leading the charge is Humana, whose stock price jumped by a staggering 10.7%, making it the top performer within the S&P 500 in early trading. Other industry giants, including UnitedHealth (up 6.9%), CVS Health, Elevance Health, Centene, and Molina Healthcare, all experienced notable gains ranging from 3.6% to 6%.
Analysts at RBC Capital Markets have described the revised payment rate as significantly exceeding their expectations, which had been in the region of 1% to 1.5%.
Jefferies analysts offered a more cautious perspective, suggesting the move was "righting an actuarial wrong" rather than a complete shift in the CMS’s approach to Medicare Advantage.
A Medicare agency official explained that insurers would also benefit from a 2.5% adjustment to risk assessment payments linked to health status, resulting in a total increase of approximately 5%.
The CMS estimates that this overall increase will translate to over $13 billion in additional payments to Medicare Advantage plans in 2027.
These government payment rates play a crucial role in determining the monthly premiums insurers charge, the benefits they offer, and ultimately, their profitability. Insurers use these rates to formulate bids for Medicare Advantage plan contracts for the year 2027.
| Company | Percentage Increase |
|---|---|
| Humana | 10.7% |
| UnitedHealth | 6.9% |
| CVS Health | 3.6-6% |
| Elevance Health | 3.6-6% |
| Centene | 3.6-6% |
| Molina Healthcare | 3.6-6% |
