Shares of U.S. health insurers fell on Tuesday after the Biden administration did not increase payments for private Medicare plans as much as the insurance industry and investors expected.
Actions of CVS Health fell more than 8% on Tuesday, while UnitedHealth GroupShares fell nearly 7%. Actions of Health elevation fell more than 3% and ryeShares fell 6%.
Meanwhile, humanShares fell more than 10%. The health care giant relies much more on those private Medicare plans, known as Medicare Advantage, than its rivals.
The announcement puts more pressure on insurers already facing high medical costs and uncertainty around claims processing after the cyberattack on UnitedHealth Group's technology unit. It also deals a blow to Medicare Advantage companies, which have long driven the insurance industry's growth and profits.
The Centers for Medicare and Medicaid Services said Monday night that government payments to Medicare Advantage plans are expected to increase 3.7% year over year. That is indeed a 0.16% drop after removing certain assumptions incorporated into that rate, according to insurers and analysts.
That final rate is unchanged from a previous proposal in January. Typically, the federal agency increases that rate from its initial proposal.
The rate, which is closely watched, determines how much insurers can charge for the monthly premiums and plan benefits they offer and, ultimately, their profits.
Medicare Advantage is a private health insurance plan contracted by Medicare. More than half of Medicare beneficiaries are enrolled in such plans, attracted by lower monthly premiums and additional benefits not covered by traditional Medicare, according to health policy research firm KFF.
