Major health insurance stocks plunged in premarket trading Tuesday after the Trump administration proposed keeping Medicare Advantage payment rates nearly flat for 2027, falling far below industry expectations. The Centers for Medicare & Medicaid Services outlined a proposal to raise Medicare Advantage payment rates by just 0.09% in 2027, according to an announcement made Monday night.
UnitedHealth Group shares dropped nearly 9% to $317.51 in premarket trading, while CVS Health’s stock fell 9.38% to $76. Humana experienced the steepest decline, with shares tumbling more than 13.1% to $229, while Elevance Health fell nearly 7% to $350.93 and Centene declined 4.36% to $44.26.
Medicare Payment Rate Proposal Falls Short of Expectations
The proposed 0.09% increase in Medicare Advantage payment rates represents a dramatic departure from Wall Street forecasts. According to the Wall Street Journal, analysts had anticipated payment rate increases between 4% and 6% for 2027. The near-zero growth stands in sharp contrast to last year’s announcement, when the Trump administration approved a 5.06% increase for 2026 that exceeded market expectations.
The proposal affects Medicare Advantage plans, which are private insurance alternatives to traditional Medicare that cover approximately 33 million Americans. These plans receive payments from the federal government to provide coverage, making payment rate adjustments critical to insurer profitability and plan design.
Political Pressure on Insurance Industry
The surprisingly low payment rate proposal comes amid intensified public criticism from President Donald Trump targeting health insurance companies. According to Bloomberg, Trump has stated he wants insurance companies to “make less, a lot less,” asserting they are “making so much money.” This rhetoric signals a shift in administration priorities regarding healthcare industry profits.
Additionally, the proposal reflects broader political pressure on insurers to reduce premiums and improve affordability for consumers. The administration appears to be using Medicare payment rates as leverage to influence private insurance pricing and profitability across the sector.
Impact on Health Insurance Companies
The sharp decline in health insurance stocks occurred even as major U.S. futures indexes remained flat or posted slight gains Tuesday morning. This divergence highlights investor concerns specific to the healthcare sector and the financial implications of constrained Medicare reimbursement rates. Lower payment rates could pressure insurers to reduce benefits, increase premiums for supplemental coverage, or accept lower profit margins on Medicare Advantage plans.
Meanwhile, the proposal represents a significant policy shift that could reshape the competitive landscape for Medicare Advantage plans. Insurance companies may need to adjust their business strategies and cost structures to accommodate the minimal revenue growth from government payments.
Official Response to Medicare Advantage Payment Proposal
CMS Administrator Dr. Mehmet Oz defended the proposal in a statement, saying the policies aim to ensure “Medicare Advantage works better for the people it serves.” However, the statement did not address industry concerns about the financial sustainability of plans under near-zero payment growth.
The proposed Medicare payment rates are subject to a public comment period before final rates are determined. The Centers for Medicare & Medicaid Services typically announces final payment rates in early April, giving insurers several months to adjust their plan offerings and pricing for the following year. Industry groups are expected to submit detailed responses outlining concerns about the proposal’s impact on beneficiary access and plan quality.
