The U.S. government announced on Monday that it will increase payments to private insurers offering Medicare Advantage plans to older adults in 2027 by an average of 2.48%, a significant increase from the nearly flat change proposed in January. This led to a surge in insurer stocks.
During a call with journalists, a Medicare agency official stated that insurers would also benefit from a 2.5% adjustment in risk assessment payments related to health status, resulting in a total increase of about 5%.
Shares of UnitedHealth, Humana, and CVS rose by 8% to 14% in extended trading as investors were relieved by the final proposal, in contrast to the declines seen after the government’s initial proposal in January, which only predicted a 0.09% increase for 2027.
The Centers for Medicare & Medicaid Services reported that the increase would result in over $13 billion in additional payments to Medicare Advantage plans in 2027.
Industry analysts and experts welcome the rate adjustment as it provides a more favorable model for insurers to predict medical costs in 2027.
Kevin Gade, CEO of investment firm Bahl and Gaynor, stated that major health insurers would benefit from a pause in changes to how Medicare agency models risks for health insurers.
The Medicare agency officials noted that the pause in risk policy changes is aimed at giving insurers and providers time to adapt to longer-term structural payment changes. Insurers had argued that the January proposal did not accurately reflect the rising medical costs.
As health plans continue to adapt to the recent policies, they remain focused on providing affordable coverage and care during a period of increased medical costs.
In 2026, the U.S. government had set the final Medicare Advantage reimbursement rate for an average increase of 5.06%, after initially proposing a 2.2% increase.
