CVS Health, UnitedHealth Group stocks tumble on lower Medicare rate proposal

Investing.com -- Shares of major health insurers plummeted in after-hours trading Monday after the Trump administration proposed significantly lower-than-expected Medicare Advantage payment rates for 2027.

CVS Health (NYSE: CVS) and UnitedHealth Group (NYSE: UNH) both fell approximately 8% while Humana (NYSE: HUM) dropped 10% following a Wall Street Journal report that the Centers for Medicare and Medicaid Services (CMS) plans to increase payments to Medicare Advantage insurers by just 0.09% on average next year.

The proposed rate increase, worth approximately $700 million to the industry, falls dramatically short of analyst expectations that had projected increases in the 4% to 6% range. For comparison, insurers received a 5.06% increase for the current year.

The Medicare agency is also proposing to eliminate what the WSJ described as a "lucrative industry billing practice" that has drawn scrutiny from government watchdogs. According to a Medicare official cited in the report, the proposal aims to improve payment accuracy and ensure appropriate reimbursement while focusing on simplicity, competition, and accuracy in the billing system.

Medicare Advantage plans, which are privately managed alternatives to traditional Medicare, represent core business segments for these insurers, making federal payment policies critically important to their financial performance.

The official announcement from CMS is expected Monday, according to the WSJ report. The proposal represents a preliminary rate notice, with final rates typically announced in April after a period of industry feedback.

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