Shares of major health insurers plunged in after-hours trading Monday following a report that the Trump administration plans to propose substantially lower Medicare Advantage payment rates for 2027 than analysts had expected.
CVS Health (NYSE:CVS) and UnitedHealth Group (NYSE:UNH) each declined by about 8% in extended trading, while Humana (NYSE:HUM) fell roughly 10%, according to market moves reported after the closing bell. The sell-off followed reporting that the Centers for Medicare and Medicaid Services intends to increase payments to Medicare Advantage plans by only 0.09% on average next year.
The proposed average increase would translate to roughly $700 million in additional payments to the industry - a figure that is materially below consensus forecasts. Analysts had been pricing in rate increases in the range of 4% to 6%, while insurers received a 5.06% boost for the current year.
In addition to the modest average increase, the agency is said to be moving to eliminate what the reporting described as a "lucrative industry billing practice" that has drawn scrutiny from government watchdogs. A Medicare official quoted in the report framed the proposal as an effort to improve payment accuracy and ensure appropriate reimbursement, with an emphasis on simplicity, competition, and accuracy in the billing framework.
Medicare Advantage plans - private plan alternatives to traditional Medicare - comprise central businesses for the affected insurers, making federal payment policy an important determinant of their financial results. Because these plans are core segments, proposed federal rate changes and billing-rule adjustments can directly affect revenue trajectories tied to those businesses.
The report indicated that the CMS official announcement was expected Monday. The action would take the form of a preliminary rate notice; final rates are typically published in April after a period during which the industry may submit feedback.
Context and implications
The information released so far is confined to the preliminary proposal and the descriptions provided by officials quoted in the report. The proposal’s status as a preliminary notice means it remains subject to change before final rates are determined in the spring after the formal comment period.