Health insurers secured a better Medicare Advantage rate for 2027, and their stocks are soaring

MW Health insurers secured a better Medicare Advantage rate for 2027, and their stocks are soaring

By Jaimy Lee

'A beaten down industry is on the cusp of potentially two years of earnings growth," said Raymond James analyst Chris Meekins

Insurers were handed an improved Medicare Advantage rate of 2.48% for 2027, easing fears for investors.

Shares of health insurers rallied in premarket trading on Tuesday after the government improved the initial Medicare Advantage rate increase for next year.

The growth rate of 2.48% for 2027 is still lower than the finalized rate increases of 5.06% in 2026 and 3.70% in 2025.

Investors were shocked in late January when the Centers for Medicare & Medicaid Services proposed a rate increase of 0.09%. That's significantly lower than the proposed rate increase of 4.33% for 2026. The proposed rates often come in lower than the final rates.

The stocks of companies like Humana $(HUM)$ and UnitedHealth Group $(UNH)$, which has the largest share of the Medicare Advantage market, tanked after the proposed rate came out, even dragging down the Dow Jones Industrial Average DJIA.

The CMS announced the improved rate increase for 2027 on Monday evening. In Tuesday's premarket, UnitedHealth gained up 7%, Humana 11%, Centene $(CNC)$ 4%, Molina Healthcare (MOH) 4%, CVS Health $(CVS)$ 6%, and Elevance Health (ELV) 6%.

"Trouble could come eventually, but right now, a beaten down industry is on the cusp of potentially two years of earnings growth," Raymond James analyst Chris Meekins said in a note.

Dig deeper: Medicare Advantage's once-blistering growth dropped in 2026. Here's what that means.

Long a safe haven for investors, health insurers are struggling with growth as medical utilization has surged and the cost of care has gone up.

That's why investors spent the last few months pushing lawmakers and the CMS to improve the 2027 rate, citing the popularity of the plans, growing utilization of medical care, and perceived errors in the calculation used for the rate proposal.

"The proposed rate simply does not match the level of medical-cost trend in the industry," CVS CEO David Joyner told investors in February. "We are advocating for more appropriate funding to ensure adequate access as well as the stability and sustainability of a program relied on by more than half of the seniors in this country."

The difference in the proposed and final rates came down to a few factors, including claims data from the fourth quarter that showed higher-than-expected rates of medical utilization and the government's decision not to advance a new risk adjustment model for 2027. Insurers have actively lobbied for a better rate in recent months, according to Spencer Perlman, director of healthcare research at Veda Partners

"I've never seen anything like it," he said. "They're being super aggressive. They always are when they have a bad advance notice."

-Jaimy Lee

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April 07, 2026 04:36 ET (08:36 GMT)

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