The decision by the Biden administration not to increase payments for private Medicare plans as much as expected has put additional pressure on health insurers, which are already facing high medical costs and uncertainty following the ransomware attack on UnitedHealth Group’s tech unit. According to the Centers for Medicare and Medicaid Services (CMS), government payments to Medicare Advantage plans are only expected to rise by 3.7% year over year, which is lower than what was anticipated.
Following the announcement, several health insurers experienced a decline in their stock prices. CVS Health shares fell over 8%, while UnitedHealth Group’s stock slid nearly 7%. Elevance Health and Centene also experienced stock declines of more than 3% and 6% respectively. Humana, which is heavily reliant on private Medicare plans, saw its stock fall by over 10%.
The impact of this decision is particularly significant for companies that rely on Medicare Advantage plans for growth and profits. The rates set by CMS have significant implications for insurers, impacting monthly premiums, plan benefits, and ultimately profitability. Medicare Advantage plans are a popular option for over half of Medicare beneficiaries due to their lower monthly premiums and added benefits not available with traditional Medicare plans, according to KFF. As such, any decline in payments can have a significant impact on the financial stability of these companies.