Stock prices for major health insurance companies soared during pre-market trading Tuesday morning after federal officials announced significantly higher payment increases for Medicare Advantage programs than previously expected.
The surge was led by UnitedHealth, which saw shares climb 6.9%, while other major insurers including CVS Health, Elevance Health, Centene and Molina Healthcare experienced gains ranging from 3.6% to 6%.
Humana, which focuses primarily on Medicare coverage, posted the strongest performance with a 10.7% jump, making it the top performer among S&P 500 companies in early trading.
Late Monday, the Centers for Medicare & Medicaid Services announced it would boost payments to private companies providing Medicare Advantage coverage to seniors by an average of 2.48% for 2027. This represents a dramatic increase from the modest 0.09% bump initially proposed in January.
Financial analysts at RBC Capital Markets noted the increase substantially exceeded their projections of 1% to 1.5%.
“We view the revision more as righting an actuarial wrong, not CMS backing off its disciplinarian attitude towards MA,” Jefferies analysts said in a note.
During a media briefing, a Medicare agency representative explained that insurance companies will receive an additional 2.5% boost through modifications to risk assessment payments tied to patient health conditions, bringing the total increase to approximately 5%.
According to CMS projections, the enhanced payment structure will generate more than $13 billion in additional funding for Medicare Advantage programs in 2027.
These government payment levels directly influence the monthly premiums insurers charge customers, determine which benefits they can provide, and ultimately impact company profitability. Insurance companies use these rates when submitting bids for Medicare Advantage contracts they plan to offer in 2027.
