Health insurers tumble after Trump administration proposes keeping Medicare Advantage rates flat next year

Shares of several big-name health care companies plunged after the Trump administration proposed nearly flat rates for Medicare Advantage insurers.

Medicare Advantage plan provider Humana dropped nearly 14% in after-hours trading, while CVS Health and UnitedHealth Group each lost more than 10%. Elevance Health lost 5%, while Centene and Molina Healthcare fell about 4%

The proposal entails a net average payment increase of 0.09% for Medicare Advantage plans in 2027, according to a release from the Centers for Medicare and Medicaid Services on Monday. That number is significantly less than Wall Street analysts' expectations that the agency would propose a rate increase of between 4% to 6% for next year.

CMS typically finalizes Medicare Advantage rates in early April. If the current proposal holds, the rate increase would result in more than $700 million in payments to Medicare Advantage plans in 2027, according to the agency's release.

The closely watched government payment rate determines how much insurers can charge for monthly premiums and plan benefits they offer, and ultimately, their profits. The Wall Street Journal first reported about the government's rate proposal on Monday.

Medicare Advantage is a privately run health insurance plan contracted by Medicare. More than half of Medicare beneficiaries are enrolled in such plans, enticed by lower monthly premiums and extra benefits not covered by traditional Medicare, according to health policy research firm KFF.

CMS said it is also looking to slash a moneymaking industry billing practice. Part of the proposal aims to improve payment accuracy and ensure Medicare insurers get adequately reimbursed, the Journal reported. 

"These proposed payment policies are about making sure Medicare Advantage works better for the people it serves," said CMS Administrator Dr. Mehmet Oz in the release. "By strengthening payment accuracy and modernizing risk adjustment, CMS is helping ensure beneficiaries continue to have affordable plan choices and reliable benefits, while protecting taxpayers from unnecessary spending that is not oriented towards addressing real health needs."