Health Insurer Stocks Plunge Following Disappointing Medicare Advantage Rate Increase

The CMS's decision to raise payments by only 3.7% for 2025, effectively a cut, shocks investors and puts pressure on insurers' profitability.

Shares of major health insurers including Humana, CVS Health, and UnitedHealth fell sharply after the Centers for Medicare and Medicaid Services (CMS) announced that payments to Medicare Advantage plans will increase by only 3.7% in 2025.
The increase, which effectively represents a 0.16% decline after adjusting for certain assumptions, disappointed investors and insurers who had hoped for a more significant boost to cover rising medical costs.
Humana, heavily reliant on Medicare Advantage plans, saw one of the steepest declines, with its stock falling by over 10%.
This decision marks a departure from the CMS's usual practice of raising rates from their initial proposal, sparking concerns about the future profitability of Medicare Advantage businesses.
The CMS also finalized improvements to the Medicare Part D drug benefit for 2025, aiming to lower drug costs with an annual out-of-pocket cap of $2,000 for people with Medicare Part D.