US health insurance companies experience decline as final Medicare Advantage rates trigger concerns over profit margins

Shares of U.S. health insurers dropped between 4% and 9% premarket on Tuesday after reimbursement rates to providers of Medicare Advantage health plans were unchanged from the initial proposal. This raised worries about a squeeze on margins next year. The U.S. Centers for Medicare & Medicaid Services (CMS) payments to Medicare Advantage (MA) programs, which serve those aged 65 and older, are expected to increase by 3.7% on average in 2025, consistent with what was published in January. Excluding some items, the rate implies a drop of 0.16%, some analysts have estimated. The CMS typically raises the final reimbursement from the advanced notice.

“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, Evercore ISI analysts said in a note. The “no improvement represented our worst-case scenario,” TD Cowen analysts wrote in a note. 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.

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