Shares of U.S. health insurers fell on Tuesday after the Biden administration failed to increase payments for private Medicare plans as much as the insurance industry and investors had hoped.
Shares of CVS Health fell more than 8% on Tuesday, during UnitedHealth GroupThe stock fell almost 7%. Shares of Elevance Health fell by more than 3% and HundredsThe stock fell 6%.
In the meantime, HumanaThe stock fell more than 10%. The health care giant is far more dependent on these private Medicare plans, known as Medicare Advantage, than its competitors.
The announcement increases pressure on insurers already struggling with high medical costs and claims processing uncertainty following the cyberattack on UnitedHealth Group's technology division. It's also a blow to the Medicare Advantage companies, which have long driven growth and profits for the insurance industry.
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The Centers for Medicare and Medicaid Services said late Monday that government payments for Medicare Advantage plans are expected to rise 3.7% year over year. This is effectively one 0.16% decrease after removing certain assumptions According to insurers and analysts, this is anchored in this tariff.
This final rate remains unchanged from a previous proposal in January. Typically, the federal agency increases this rate from its original proposal.
The closely watched rate determines how much insurers can charge for the monthly premiums and plan benefits they offer, and ultimately their profits.
Medicare Advantage is privately owned health insurance covered by Medicare. More than half of Medicare beneficiaries enroll in such plans because they are lured by lower monthly premiums and additional benefits not covered by traditional Medicare, according to health policy research firm KFF.
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