Investors betting on a Medicare Advantage windfall just got a jolt. Shares of major health insurers sank on Tuesday after the Centers for Medicare and Medicaid Services proposed 2027 payment rates for private Medicare plans that were far lower than Wall Street had penciled in, the Wall Street Journal reports. The agency's draft calls for an increase of about 0.09%, versus analyst expectations of roughly 5%. Stocks in companies including UnitedHealth Group and Humana, CVS Health, and Elevance Health dropped sharply, erasing more than $90 billion in market value as investors abandoned the sector, reports Bloomberg. UnitedHealth, the nation's largest health insurer, fell 19.6%.
"These guys definitely have a case of whiplash," Medicare consultant John Gorman tells the Journal. "Shock and dismay is a lot of what I'm hearing." The proposal hits at the core of the insurers' growth engine. Medicare Advantage—the privately run alternative to traditional Medicare—produced an estimated $500 billion in industry revenue last year and is more important to UnitedHealth's top line than its commercial insurance business. But that profit machine has already come under pressure, in part from Biden-era efforts to rein in aggressive billing tactics. Raymond James analyst John Ransom, estimated earnings could drop as much as 18.6% at UnitedHealth, 12% at CVS, and a steep 75% at Humana, which was already bracing for a tough 2027.
CMS officials framed the move as a push for accuracy and sustainability rather than a slap at insurers. Deputy administrator Chris Klomp said the agency aims to improve payment precision, ensure stable reimbursements, and keep the Medicare Advantage market competitive over the long term. The proposal would also stop paying plans based on diagnoses pulled solely from insurer-led chart reviews not tied to actual medical visits — a practice critics say inflated payments. CMS actuaries' lower-than-expected cost projections also weighed on the rates.
Insurers are gearing up for an intense lobbying blitz before final rates are set in April. In past fights, the industry has mobilized seniors and high-profile ad campaigns, including Super Bowl spots. UnitedHealth executive Tim Noel warned of a "profoundly negative impact on seniors' benefits and access to care" if the rule stands. But the political backdrop is less forgiving: the Trump administration is seeking to curb federal spending, key lawmakers have recently grilled insurance CEOs over care denials and profits, and CMS chief Mehmet Oz has cast himself as a "new sheriff in town" eager to crack down on "upcoding" and other billing maneuvers.
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