On January 26, the United States government announced a proposed average payment increase of 0.09% for private insurers managing Medicare Advantage plans for the upcoming year. Following this news, shares of companies like UnitedHealth saw a drop of over 10%.
Other companies in the sector, such as CVS Health and Humana, also faced declines in their stock prices. Elevance Health’s shares fell between 8% to 13%, while Centene and Molina Healthcare were also impacted, with Molina’s shares dropping nearly 5% in after-hours trading.
The government attributed the payment adjustments to evolving cost trends, quality ratings for 2026, and a revised risk adjustment model that would result in insurers paying more for seriously ill patients.
CMS Administrator Mehmet Oz emphasized that these payment policies are designed to improve Medicare Advantage services and are aimed at modernizing risk adjustment while safeguarding taxpayer money.
The proposed increase is expected to generate an additional $700 million for 2027. However, some industry analysts had anticipated a more significant rate increase, closer to 4% to 5%. This lower-than-expected adjustment could influence UnitedHealth’s profit margin and earnings per share, according to Kevin Gade from Barr & Gaynor.
Gade noted that investors might gain further insights during an upcoming conference call with UnitedHealth CEO Stephen Hemsley, scheduled after the fourth-quarter earnings report.
Morningstar analyst Julie Utterback mentioned that the industry is closely monitoring any potential changes regulators might make before finalizing the new rules. “We’ll see what happens in a few months when the agency releases its final notification,” she commented, also noting that projected coding-related payments might increase by 2.45% next year.
The Medicare agency is set to reveal the final rates on April 6. Chris Bond from America’s Health Insurance Plans highlighted the need for reforms that strengthen Medicare Advantage but raised concerns about the implications of flat funding amid rising costs; this could lead to coverage reductions and increased expenses for 35 million seniors and disabled individuals renewing their plans in October 2026.
Currently, more than half of those enrolled in the Medicare program for individuals aged 65 and older or with disabilities receive their insurance through Medicare Advantage plans.
