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Health insurer stocks take a hit as Medicare Advantage rates fall short of expectations

On Monday, the Centers for Medicare and Medicaid Services announced that government payments to Medicare Advantage plans would increase by 3.7% year over year. However, this announcement did not meet the expectations of insurers such as CVS Health, UnitedHealth Group, Elevance Health, Centene, and Humana.

On Tuesday, shares of these U.S. health insurers saw a decline after it was revealed that the Biden administration did not increase payments for private Medicare plans as much as anticipated. This led to a drop in value for stocks such as Humana, which heavily relies on private Medicare plans or Medicare Advantage.

The decision by the Centers for Medicare and Medicaid Services to only increase payments by 0.16% after stripping out certain assumptions added more pressure on insurers already facing high medical costs and challenges following a cyberattack on UnitedHealth Group’s tech unit. The Medicare Advantage business has traditionally been a source of growth and profits for the insurance industry.

In January, there was an earlier proposal from the federal agency that set the rate unchanged from this latest announcement. This is not typical as the agency usually increases the rate after an initial proposal. However, with this latest news, it seems like insurers are struggling to keep up with rising medical costs and declining profits from their Medicare Advantage business.

By Samantha Jones

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