Lower Medicare rates impact CVS, Humana, and other health stocks

Stock Prices Plummet after Medicare Payment Announcement: What Does it Mean for Health Insurers?

On Tuesday morning, the stocks of several major health insurance companies, including Humana, CVS Health, UnitedHealth and Elevance Health, took a hit after federal regulators announced that Medicare payments to certain programs would remain at industry expectations. The Centers for Medicare and Medicaid Services (CMS) announced that government payments to the Medicare Advantage and Medicare Part D programs will increase by an average of 3.7% or $16 billion year-over-year in 2025.

Humana, one of the largest players in the Medicare Advantage market, saw a significant decrease in its stock price following the announcement. Its shares fell by 12%, while UnitedHealth’s stock dropped by 6%. CVS Health shares slid by 8%, Centene Corp.’s stock fell by 5%, and Elevance Health’s stock dropped by 4%. Despite this rate increase being slightly higher than what was initially proposed in January, it is still below what industry experts had expected. Over the past decade, final rates have only been increased from their initial proposal once.

In March, during an investor call, Humana CFO Susan Diamond expressed disappointment over the rate increase and stated that it may be challenging for the company to meet its earnings goals without a bigger boost in payments. This news comes as other pharmaceutical companies are also facing challenges. For example, Eli Lily has faced criticism over the low cost of producing its weight loss drug ZepboundOzempic, while backlash has continued over Mylan’s pricing practices with its life-saving drug EpiPen.

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