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. The announcement came 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. Centene, Humana, CVS Health, and UnitedHealth Group all experienced drops in their stock prices as a result of this announcement.
According to reports, 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 is a privately administered health insurance option under Medicare that 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.
