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Health Insurer Stocks Fall as Final Medicare Advantage Rates Disappoint

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Healthcare stocks are heading for their worst day since early November

Shares of U.S. health insurers fell Tuesday after the Biden administration did not increase payments for private Medicare plans as much as the insurance industry and investors had hoped.

Actions of CVS Health fell more than 8% on Tuesday, while UnitedHealth GroupShares of slipped nearly 7%. Actions of Élevance Santé fell by more than 3% and CenteneShares of fell 6%.

In the meantime, HumanShares of fell more than 10%. The health care giant is far more reliant on these private Medicare plans, known as Medicare Advantage, than its rivals.

The announcement puts more pressure on insurers, already struggling with high medical costs and uncertainty surrounding claims processing after the cyberattack on UnitedHealth Group’s technology unit. It also deals a blow to Medicare Advantage companies, which have long driven growth and profits in the insurance industry.

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The Centers for Medicare and Medicaid Services said Monday evening that government payments to Medicare Advantage plans are expected to increase 3.7% year over year. It is indeed a Decrease of 0.16% after removing certain assumptions integrated into this rate, according to insurers and analysts.

This final rate is unchanged from an earlier proposal in January. Typically, the federal agency increases this rate from its initial proposal.

The closely monitored rate determines how much insurers can charge for monthly premiums and benefits for the plans they offer, and, ultimately, their profits.

Medicare Advantage is a private health insurance plan underwritten by Medicare. More than half of Medicare beneficiaries are enrolled in such plans, attracted by lower monthly premiums and additional benefits not covered by traditional Medicare, according to health policy research firm KFF.

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