On Tuesday morning, health insurance stocks took a hit after federal regulators did not raise payments for Medicare plans as expected. However, the Centers for Medicare and Medicaid Services (CMS) announced that government payments to Medicare Advantage and Medicare Part D programs would increase on average by 3.7%, or $16 billion, year-over-year in 2025.
CMS Administrator Chiquita Brooks-LaSure stated that the rate increase is intended to maintain the stability of the Medicare Advantage and Part D prescription drug programs and keep payments up-to-date and accurate. This news led to a decline in stock prices for several companies in the industry, including Humana, CVS Health, UnitedHealth, and Elevance Health.
UnitedHealth stock fell 6%, CVS Health shares slid 8%, Centene Corp. stock fell 5%, and Elevance Health stock dipped 4%. The rate increase was in line with a proposal made in January, and historically, final rates have not deviated from initial proposals in the past decade. Humana CFO Susan Diamond expressed concerns during an investor call in March about the impact of the rate increase on the company’s earnings goals.
In other pharmaceutical news, Eli Lily’s Zepbound is facing a weight loss drug shortage due to production delays caused by supply chain issues. Additionally, a study revealed that Ozempic costs only $5 to make, leading to swift backlash within the industry as some argue that patients should have access to affordable medications regardless of their cost to produce.
