Biotech
Wednesday, April 3rd, 2024 3:31 pm EDT
Key Points
- U.S. health insurers’ stocks experienced a significant decline following the Biden administration’s decision not to increase payments for private Medicare plans as anticipated, disappointing both the insurance industry and investors.
- Major health insurers such as CVS Health, UnitedHealth Group, Elevance Health, Centene, and particularly Humana saw notable drops in their stock prices, with Humana being disproportionately affected due to its heavy reliance on private Medicare plans, known as Medicare Advantage.
- The announcement adds pressure on insurers already facing challenges like high medical costs and the aftermath of a cyberattack on UnitedHealth Group’s tech unit. It also impacts Medicare Advantage businesses, which have traditionally been key drivers of growth and profits for the insurance industry, potentially affecting insurers’ profitability and strategic decisions.
Health insurers in the U.S. experienced a significant decline in their stock prices on Tuesday following the Biden administration’s decision not to increase payments for private Medicare plans as much as anticipated by the insurance industry and investors. CVS Health saw its shares plummet by more than 8%, while UnitedHealth Group witnessed a nearly 7% decline. Similarly, Elevance Health and Centene saw drops of more than 3% and 6%, respectively. Humana, heavily reliant on Medicare Advantage plans, suffered the most with its stock falling over 10%. The announcement exacerbates existing challenges for insurers dealing with soaring medical costs and the aftermath of a cyberattack on UnitedHealth Group’s tech unit, further impacting Medicare Advantage businesses crucial for industry growth and profits. The Centers for Medicare and Medicaid Services revealed that government payments to Medicare Advantage plans are projected to increase by 3.7% year over year, representing a marginal decrease of 0.16% after adjusting for certain assumptions. This final rate, unchanged from a previous proposal in January, influences insurers’ premium charges, plan benefits, and ultimately, their profitability. Medicare Advantage, serving more than half of Medicare beneficiaries, offers lower premiums and additional benefits compared to traditional Medicare, making the rate determination a pivotal factor for insurers’ financial performance and strategic decisions.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/04/02/health-insurer-stocks-slide-as-medicare-advantage-rates-disappoint.html
