Health Insurer Stocks Climb Following Medicare Payment Increase

 

 

Health insurance companies saw a significant rise in their stock prices on Tuesday after the U.S. government announced that it would raise the reimbursement rates for Medicare plans more than previously projected.

Humana (HUM) saw its stock surge by more than 9%, while UnitedHealth Group (UNH) climbed 6%. CVS (CVS), which owns Aetna, gained approximately 8%.

The Centers for Medicare & Medicaid Services (CMS) announced on Monday that average payments to Medicare Advantage plans will go up by more than 5%, surpassing the 2.83% increase the agency had forecast back in January. According to analysts at UBS, that adjustment “should ease some of the funding pressure” the insurance companies face.

UBS also noted that the adjustment could mean Humana (HUM) has an “easier path” to return to hitting margin targets. For UnitedHealth (UNH), which is already meeting its margin goals, the additional flexibility could help the company boost membership numbers, the analysts said.

Meanwhile, CVS (CVS) received an extra lift as the Aetna parent company indicated that it now anticipates meeting or exceeding its earlier full-year earnings forecast.