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

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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