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Insurers Plunge on Low Medicare Rate Hike
28 Jan
Summary
- Medicare Advantage rates proposed to rise 0.09% for 2027.
- Major insurers like UnitedHealth saw shares drop significantly.
- Potential benefit cuts and higher costs for 35 million seniors.
Health insurance stocks plummeted on Tuesday after the Trump administration proposed a modest 0.09% increase for 2027 Medicare Advantage plan payments. This figure falls far below the 6% increase analysts had predicted, significantly impacting major insurers. UnitedHealth Group, which has the largest Medicare Advantage enrollment share at approximately 30%, saw its stock decline by nearly 20%.
Elevance Health and CVS experienced stock drops of around 14%. The minimal proposed rate hike comes at a time when insurers are already operating with tight margins, as indicated by UnitedHealth's Medical Care Ratio of 89.1%. The industry group AHIP warned that this proposal, if implemented, could lead to benefit reductions and higher expenses for 35 million seniors and people with disabilities.
This development follows a more favorable 5.06% increase for 2026 Medicare Advantage plans. Final rates for 2027 are expected by April 6. UnitedHealth also reported fourth-quarter and full-year 2025 revenues below expectations, adding to investor concerns. The company anticipates a 2% year-over-year decline in 2026 revenue, partly due to a cyberattack's impact.
