US health insurers slide as final Medicare payment rates fall short of expectations

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The rates, which indicated a 0.2% fall in average payments, are unchanged from what was proposed in January, despite pressure from companies and industry groups to incorporate a late-year surge in medical care demand.

The rates could pile more pressure on margins at insurers already struggling with high medical costs, and uncertainty around insurance claims processing due to the fallout of a hack at UnitedHealth (NYSE:UNH)’s tech unit.

Shares of Medicare-focused insurer Humana (NYSE:HUM) fell the most, plunging over 9% to $319.73. UnitedHealth slumped 4.1%, while CVS Health (NYSE:CVS) tumbled 5.3%.

The “less-than-favorable rate updates, which coupled with the potentially clouded claims development in light of the Change Health cyberattack … may put the once-golden Medicare Advantage market in somewhat less favorable standing,” said Citi analyst Jason Cassorla.

CMS payments to Medicare Advantage (MA) programs, which serve those aged 65 and older, are expected to increase by 3.7% on average in 2025, according to the final notice published late Monday.

Excluding some items, the rate implies a drop of 0.16%, some analysts have estimated. The CMS typically raises the final reimbursement from the advanced notice.

In a note titled “Wish This Was April Fools”, TD Cowen analysts said the final rates were the brokerage’s worst-case scenario come true.

The closely watched proposal determines how much insurers can charge for monthly premiums, plan benefits they offer and, ultimately, their profits.