Shares of U.S. health insurers fell on Tuesday after the Biden administration did not boost private Medicare plan payments as much as the insurance industry and investors had hoped.
shares CVS Health It fell more than 8% on Tuesday, while UnitedHealth GroupThe company's stock fell nearly 7%. shares Elevance Health fell more than 3% and Two centsThe stock fell 6%.
while, HumanaThe company's stock fell by more than 10%. The health care giant relies more heavily on private Medicare plans, known as Medicare Advantage, than its competitors.
The announcement puts more pressure on insurers already struggling with rising medical costs and uncertainty over claims processing after the cyberattack on UnitedHealth Group's technology unit. It also deals a blow to Medicare Advantage companies, which have long led growth and profits for the insurance industry.
The Centers for Medicare and Medicaid Services said late Monday that government payments to Medicare Advantage plans are expected to rise 3.7% year over year. This represents an actual decrease of 0.16% after eliminating some assumptions involved in this rate, according to insurers and analysts.
This final rate is unchanged from the previous proposal in January. Typically, the federal agency raises this rate from its initial proposal.
The closely watched rate determines how much insurers can charge for the monthly premiums, plan benefits they offer, and ultimately their profits.
Medicare Advantage is a privately operated health insurance plan contracted by Medicare. More than half of Medicare beneficiaries are enrolled in such plans, due to lower monthly premiums and additional benefits not covered by traditional Medicare, according to health policy research firm KFF.
