US health insurers fell after hours after the Trump administration proposed a near-flat 2027 Medicare Advantage rate increase, far below expectations and coupled with tighter billing rules.
Summary:
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US health-insurer stocks fell sharply after hours on news of weaker-than-expected Medicare Advantage rates.
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The Trump administration proposed just a 0.09% average increase for 2027, far below Street expectations.
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CMS also plans to curb chart-review diagnosis payments, cutting rates by 1.53ppt.
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Analysts had expected a 4%–6% headline increase following last year’s generous rise.
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The proposal raises concerns over earnings pressure for insurers with large Medicare exposure.
The Wall Street Journal (gated) reported that the Trump administration is proposing effectively flat payment rates for Medicare Advantage insurers in 2027, triggering sharp after-hours declines across the health-insurance sector.
Under the proposal, average payments to private Medicare plans would rise by just 0.09%, a figure well short of Wall Street’s expectations for a mid-single-digit increase. Analysts had been forecasting a rate rise of roughly 4% to 6%, particularly after insurers received a 5.06% increase this year that exceeded market estimates.
The proposal, due to be formally announced by the Centers for Medicare and Medicaid Services (CMS), also includes a significant policy change that would eliminate payments linked to diagnoses derived from insurer medical chart reviews that are not associated with a specific medical visit. CMS estimates this adjustment alone would reduce the 2027 payment rate by 1.53 percentage points.
Taken together with underlying billing trends that are expected to add 2.45%, total Medicare Advantage payments are still projected to rise 2.54% in 2027. However, the composition of that increase, and the near-flat headline rate, has unsettled investors.
Shares of insurers with large Medicare Advantage exposure, including UnitedHealth Group, Humana and CVS Health, fell sharply in after-hours trading following the report.
A Medicare official told the Journal that the proposal is designed to improve payment accuracy and rein in billing practices that have drawn scrutiny from government watchdogs. The agency said it wants to simplify the billing system, promote competition and ensure insurers are reimbursed appropriately, without encouraging aggressive coding practices.
Medicare Advantage is a core profit driver for large US insurers, making federal rate decisions a major determinant of earnings. While the 0.09% increase is estimated to be worth around $700m to the industry overall, investors appear focused on the downside risk to margins and growth assumptions
