On Tuesday, the shares of U.S. health insurers dropped between 4% and 9% premarket after reimbursement rates to providers of Medicare Advantage (MA) health plans remained unchanged from the initial proposal. This has raised concerns about a squeeze on margins next year, particularly for those operating in the Medicare Advantage market.
The U.S. Centers for Medicare & Medicaid Services (CMS) payments to MA programs, which serve those aged 65 and older, are expected to increase by an average of 3.7% in 2025, consistent with what was published in January. However, some analysts have estimated that this implies a drop of only 0.16%, excluding some items. Despite this, Evercore ISI analysts noted that with most anticipating some improvement in the effective growth rate, the rates come as a disappointment for companies operating in the Medicare Advantage market who are likely to see continued margin pressure.
TD Cowen analysts wrote that the “no improvement represented our worst-case scenario” leading the decline was Humana, slumping 8.8%, as its business is focused on the Medicare Advantage market. UnitedHealth fell 4%, while CVS Health tumbled 5%. The closely watched proposal decides how much insurers can charge for monthly premiums, plan benefits they offer and ultimately their profits.
