On Tuesday, several health insurance companies suffered a decline in their stocks after the Centers for Medicare and Medicaid Services (CMS) announced that government payments to Medicare Advantage and Medicare Part D programs would only increase by an average of 3.7% or $16 billion year-over-year in 2025. This was below industry expectations and caused shares to drop for companies such as Humana, CVS Health, UnitedHealth, and Elevance Health.
Humana, the nation’s second-largest Medicare Advantage health insurer, saw a 12% decrease in its stock on Tuesday morning. UnitedHealth stock fell by 6%, CVS Health shares slid by 8%, Centene Corp. stock fell by 5%, and Elevance Health stock dropped by 4%. The rate increase announced by CMS is the same as a rate proposal made in January, and over the past 10 years, final rates were not increased from their initial proposal only once.
This news comes as other pharmaceutical companies also face challenges. For example, Eli Lily is currently facing a weight loss drug shortage affecting ZepboundOzempic and backlash over the low cost of producing the drug. During an investor call in March, Humana CFO Susan Diamond expressed disappointment in the rate increase, stating that it may be challenging for the company to reach its goal of boosting earnings by $6 to $10 without a bigger increase in payments.
