United States health care stocks have plummeted following the Trump administrations proposing keeping federal payments to private Medicare plans roughly flat in 2027, which is far below insurers' expectations.
The Centers for Medicare & Medicaid Services (CMS) proposed a net average payment of 0.09% in 2027 in a press release, which is significantly lower than the expected proposed rate between 4% and 6%.
“By strengthening payment accuracy and modernising risk adjustment, CMS is helping ensure beneficiaries continue to have affordable plan choices and reliable benefits, while protecting taxpayers from unnecessary spending that is not oriented towards addressing real health needs,” CMS administrator Mehmet Oz said.
CMS finalises Medicare Advantage rates in early April, and if the current proposal holds, the rate increase would result in more than US$700 million in payments to Medicare.
This proposal threatens revenue and margins in a core profit engine for major health insurers.
In comparison, insurers received a more than 5% payment bump for 2026.
CMS also proposed eliminating a practice that allows the insurers to add diagnoses after reviewing patients' medical records — a move that addresses coding practices that have received scrutiny and that the Wall Street Journal found added billions of extra payments from 2018 to 2021.
Insurers whose shares were impacted include Humana, which fell 19%, Centene, dropping 11%, CVS and Elevance, both falling 11%, and UnitedHealth decreasing by 19%.
During its earnings call, UnitedHealth said it is already shrinking its Medicare business amid rising costs and multiple years of Medicare funding reductions.
The company also reported lacklustre 2026 guidance, including revenue of at least US$439 billion, which would be a 2% year-over-year drop. This is due to “planned right-sizing across the enterprise,” UnitedHealth said.
