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US Health Insurance Companies Decline as Final Medicare Payment Rates Fall Below Projections

Medicare Advantage insurers in the US experienced a significant decline in stock prices on Tuesday, with shares dropping between 6% and 12%. This was due to the release of the final 2025 rates for Medicare Advantage payments by the government, which suggested a decline of only 0.2% in average payments, unchanged from the proposed rates in January.

This news has raised concerns about a margin squeeze for insurers, who are already grappling with high medical costs and uncertainties surrounding insurance claims processing due to a hack at UnitedHealth’s tech unit. Humana, a Medicare-focused insurer, suffered the most significant drop, plunging over 12% to a nearly four-year low.

UnitedHealth and CVS Health also experienced declines of 6.6% and 7.7%, respectively, in early trading. These losses had a ripple effect on the blue-chip Dow index and the benchmark S&P 500 in morning trading. The unfavorable rate updates, combined with potential challenges in claims development due to the cyberattack, have raised concerns about the future of the Medicare Advantage market.

However, there was some good news for investors as CMS indicated that there was no notable increase in demand for medical care during the fourth quarter of 2023, contrary to statements from insurers like Humana and UnitedHealth. This proposal plays a crucial role in determining insurers’ premium rates, plan benefits, and overall profitability. High costs and low rates may compel insurers to reduce the number of benefits they offer, potentially diminishing the value of Medicare Advantage plans in the eyes of consumers.

In summary, while there were no significant increases in demand for medical care during the fourth quarter of 2023, concerns about margin squeezes for insurers remain as they continue to grapple with high medical costs and uncertainties surrounding insurance claims processing due to cyberattacks.

By Samantha Jones

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