Stocks of health insurers decline due to underwhelming Medicare Advantage rates

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Recently, shares of U.S. health insurers took a hit after the Biden administration didn’t increase payments for private Medicare plans as much as expected. CVS Health saw its stock drop by over 6%, while UnitedHealth Group’s stock slid roughly 6%. Elevance Health and Centene also experienced declines in their stock prices. Humana, in particular, saw its stock fall by more than 10%, as it is heavily reliant on private Medicare plans.

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This announcement has added pressure to insurers already dealing with high medical costs and uncertainty surrounding claims processing following a cyberattack on UnitedHealth Group’s tech unit. Additionally, the news poses challenges for Medicare Advantage businesses, which have been a source of growth and profits for the insurance industry.

The Centers for Medicare and Medicaid Services disclosed that government payments to Medicare Advantage plans are expected to increase by 3.7% year over year. However, after adjusting for certain assumptions, this translates to a 0.16% decline, according to insurers and analysts. This final rate remained unchanged from an earlier proposal in January, although agencies typically raise the rate from the initial proposal.

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Medicare Advantage is a privately run health insurance plan contracted by Medicare, with over half of Medicare beneficiaries enrolled in such plans. These plans offer lower monthly premiums and additional benefits not covered by traditional Medicare, making them an attractive option for many.

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