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* Insurers will receive an overall increase in payments of about 5% after the risk evaluation adjustment
* UnitedHealth, Humana, and CVS stocks surge 8 to 14% after the announcement of higher-than-expected rates
* CMS says over $13 billion in additional payments are expected for Medicare Advantage in 2027
(Add comment from Medicare official in paragraph 2, comments from analysts, investors, and industry experts in paragraphs 5, 7, 11) by Christy Santhosh and Amina Niasse
The U.S. government declared on Monday that it will increase payments to private insurers offering Medicare Advantage plans to seniors in 2027 by an average of 2.48%, an increase from the nearly flat change it proposed in January, resulting in a sharp rise in insurer stocks.
An official from the Medicare agency stated in a call with journalists that insurers will also receive a 2.5% boost through a modification in risk evaluation payments tied to health status, for a total increase of about 5%.
UnitedHealth UNH.N, Humana HUM.N, and CVS CVS.N stocks rose from 8% to 14% in extended trading, with investors relieved by the final proposal, which sharply contrasts with stock declines after the government’s January proposal, which only foresaw a 0.09% increase for 2027.
The Centers for Medicare & Medicaid Services stated that the increase will result in over $13 billion in additional payments to Medicare Advantage plans in 2027.
Julie Utterback, an analyst at Morningstar, stated that the payment rate was a relief for investors and provided insurers with a more favorable model to predict medical costs in 2027.
MODIFICATION OF RISK ASSESSMENT
Kevin Gade, CEO of investment firm Bahl and Gaynor, mentioned that major health insurers would benefit from a pause in changes to how the Medicare agency models risks for health insurers.
“The final rate is actually closer to 3.5% to 4%,” he estimated, taking into account other changes in payment methods. “We can say this is a win.”
Medicare agency officials stated the pause in the risk policy change was to give insurers and providers time to adjust to other long-term structural payment changes. A CMS official noted that insurers had abandoned some capitation plans that pay a fixed amount per member – aiming to reduce costs – and providers had left Medicare Advantage networks.
Health insurers had argued that the January proposal did not reflect the realities of rising medical costs.
“As health plans incorporate the policies announced in recent days, they will continue to focus on maintaining coverage and care as affordable as possible in this period of high medical cost increases,” said Chris Bond, spokesperson for AHIP, the health insurance trade organization.
The U.S. government had set the final Medicare Advantage reimbursement rate for 2026 at an average increase of 5.06%, after initially proposing a 2.2% increase.
