CMS Announces Higher Medicare Advantage Rates for 2027, Insurers' Stocks Surge

The Centers for Medicare & Medicaid Services finalized Medicare Advantage rates for 2027 with a 2.5% average increase, significantly higher than initially proposed, adding an estimated $13 billion in revenue for insurers. The Trump administration scrapped proposals to use updated data and implement a new risk adjustment model, decisions that retain billions of dollars for the industry and represent a response to industry pressure. The three largest Medicare Advantage insurers—UnitedHealth Group, Humana, and CVS Health—which together cover almost 60% of all enrollees, saw their stock prices surge more than 8% in after-hours trading following the announcement. The finalized rates represent a major victory for the Medicare Advantage industry, which has faced higher medical costs and has consistently opposed reforms to the taxpayer-financed program.

CMS Rate Increase and Policy Reversal for Medicare Advantage

• ▪The finalized Medicare Advantage rate is estimated to add $13 billion in revenue next year for insurers, according to the Centers for Medicare and Medicaid Services
• ▪The Trump administration scrapped a new risk adjustment model for Medicare Advantage payments
• ▪The 2.5% Medicare Advantage rate increase for 2027 is up significantly from what was initially proposed by the Centers for Medicare and Medicaid Services
• ▪The Trump administration scrapped a proposal that would have used more updated data in the Medicare Advantage payment process
• ▪Companies that sell Medicare Advantage plans will receive a 2.5% pay bump on average in 2027
• ▪Scrapping the updated data proposal ensures that Medicare Advantage insurers retain billions of dollars

Financial Impact on Major Health Insurance Companies

• ▪UnitedHealth Group, Humana, and CVS Health together cover almost 60% of all people enrolled in Medicare Advantage
• ▪UnitedHealth Group, Humana, and CVS Health are the three largest Medicare Advantage insurers
• ▪UnitedHealth Group stock price climbed by more than 8% during after-hours trading following the Medicare Advantage rate announcement

Industry Pressure and Opposition to Program Reforms

• ▪The Medicare Advantage industry has experienced higher medical costs
• ▪The Medicare Advantage industry has opposed nearly all reforms to the taxpayer-financed program
• ▪The Trump administration bowed to industry pressure in scrapping the new Medicare Advantage risk adjustment model
• ▪The higher 2027 Medicare Advantage rates represent a major win for health insurers

Perspective of Medicare Advantage insurers

• ▪Scrapping the updated data proposal ensures that Medicare Advantage insurers retain billions of dollars
• ▪The Medicare Advantage industry has experienced higher medical costs

Perspective of Trump administration

• ▪The Trump administration bowed to industry pressure in scrapping the new Medicare Advantage risk adjustment model

Perspective of Medicare Advantage reform advocates

• ▪The Medicare Advantage industry has opposed nearly all reforms to the taxpayer-financed program