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Health insurance company stocks drop after final Medicare Advantage rates fall short of expectations – NBC Chicago


Apr 2, 2024

Shares of U.S. health insurers fell after the Biden administration didn’t boost payments for private Medicare plans as much as the insurance industry and investors had hoped. The announcement puts more pressure on insurers already grappling with high medical costs and uncertainty around claims processing after the ransomware attack at UnitedHealth Group’s tech unit. The Centers for Medicare and Medicaid Services late Monday said that government payments to Medicare Advantage plans are expected to rise 3.7% year over year.

The decrease in payments for private Medicare plans by the Biden administration led to a decline in the stock prices of various health insurers. CVS Health fell more than 8%, while UnitedHealth Group and Elevance Health also saw significant drops in their stock values. Humana, which heavily relies on Medicare Advantage plans, experienced a more than 10% decrease in stock value. This announcement has put more pressure on the already struggling health insurers and poses challenges for the Medicare Advantage businesses.

The final rate increase announced by the Centers for Medicare and Medicaid Services on Monday was lower than what insurers and analysts had expected. The 3.7% increase is effectively a 0.16% decline after considering certain assumptions. This announcement was surprising as typically the federal agency raises the initial rate proposed in January. The rate increase determines how much insurers can charge for premiums and benefits, affecting their profits. Medicare Advantage is a popular health insurance plan among Medicare beneficiaries, offering lower premiums and additional benefits not covered by traditional Medicare.

Overall, the Biden administration’s decision to not raise payments for private Medicare plans has negatively impacted health insurers, leading to a decline in stock prices and putting more pressure on the industry. With challenges already faced due to high medical costs and the recent cyberattack on UnitedHealth Group’s tech unit, health insurers are in for a tough time ahead. Medicare Advantage, a key component of the health insurance industry, is also affected, threatening growth and profits for insurance providers.

By editor

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