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Stocks of health insurers decline due to below-expected Medicare Advantage rates

Byeditor

Apr 2, 2024

On Tuesday, shares of U.S. health insurers saw a decline after the Biden administration did not raise payments for private Medicare plans as much as the insurance industry and investors had anticipated. CVS Health, UnitedHealth Group, Elevance Health, Centene, and Humana all experienced drops in their stock prices as a result. Humana, in particular, relies heavily on private Medicare plans, known as Medicare Advantage, for its revenues.

This announcement comes at a time when insurers are already facing challenges with rising medical costs and uncertainty around claims processing following the cyberattack on UnitedHealth Group’s technology unit. The news is especially disappointing for Medicare Advantage businesses, which have been a key driver of growth and profits for the insurance sector.

The Centers for Medicare and Medicaid Services revealed that government payments to Medicare Advantage plans are slated to increase by 3.7% year over year, which actually equates to a slight decrease after accounting for certain assumptions. This final rate, which remained unchanged from a previous proposal in January, plays a critical role in determining premiums, plan benefits, and ultimately, insurer profits.

Medicare Advantage, a privately administered health insurance option under Medicare, is chosen by more than half of Medicare beneficiaries for its lower premiums and additional benefits not covered by traditional Medicare. This news highlights the challenges facing insurers in navigating government regulations and market dynamics in the healthcare industry.

By editor

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