Shares for the largest health insurance companies in the United States soared during early trading on Tuesday after the Trump administration reversed course by boosting Medicare Advantage payment rates following a monthslong lobbying campaign by the healthcare industry.
The Trump administration announced Monday afternoon that Medicare Advantage, managed by private insurance companies, would be receiving an additional $13 billion in payments for the 2027 plan year, significantly more than the administration’s initial promise in January of only $700 million in increased reimbursement for next year’s coverage.
Following the announcement, stock prices rose on Tuesday morning for Humana, UnitedHealth Group, and CVS Health. All were up more than 10% over the past five days as of one hour of trading on Tuesday morning.
But the stock market response to the new announcement has not made up for the losses for health insurance companies after the January initial estimated Medicare Advantage payment notice.
Dr. Meemet Oz, Centers for Medicare and Medicaid Services administrator, initially proposed a 0.09% increase in reimbursement rates for Medicare Advantage plans in 2027, sparking panic among health insurers that the new figure would not be enough to cover the rising costs of healthcare.
Insurers warned that the rate initially proposed by CMS would force them to eliminate popular benefits offered to Medicare Advantage enrollees, such as vision and hearing, and to reduce service areas.
Medicare Advantage, in which private health insurers are reimbursed by the federal government to provide coverage for seniors, has been a sticky subject, as the Trump administration and the Republican Party have repositioned their relationship with major health insurance companies.
The Medicare Advantage program, sometimes referred to as Medicare Part C, was created under the George W. Bush administration as a quasi-free-market alternative to traditional fee-for-service Medicare. Since then, more than half of U.S. seniors are enrolled in Medicare Advantage plans instead of traditional Medicare.
But in recent months, Oz and his team have made eliminating wasteful spending from the program a pillar in the Trump administration’s broader goal of rooting out waste, fraud, and abuse from federal entitlement programs.
President Donald Trump and congressional Republicans have also been increasingly open to criticism of large insurance companies more broadly following last year’s fight over whether to renew enhanced premium subsidies for private companies administering Obamacare marketplace exchange insurance plans.
The GOP successfully blocked attempts to renew those subsidies, arguing that they were effectively handouts to large insurers.
Trump officials said during a press call on Monday that the new rate announcement for Medicare Advantage reimbursement does not contradict the administration’s stated goals of restoring integrity to the Medicare Advantage program.
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Chris Klomp, the director of Medicare and a chief adviser to the head of the Department of Health and Human Services, told reporters the agency is still aiming to monitor insurer behaviors to reduce improper payment rates.
“We are focused in this announcement in balancing near-term program stability with long-term program sustainability,” Klomp said.
