US health insurers slide as final Medicare Advantage rate sparks margin hit fears

London: Shares of U.S. health insurers dropped between 4 per cent and 9 per cent premarket on Tuesday after reimbursement rates to providers of Medicare Advantage health plans were unchanged from the initial proposal, raising worries about a squeeze on margins next year.

The U.S. Centers for Medicare & Medicaid Services (CMS) payments to Medicare Advantage (MA) programs, which serve those aged 65 and older, are expected to increase by 3.7 per cent on average in 2025, consistent with what was published in January.

Excluding some items, the rate implies a drop of 0.16 per cent , some analysts have estimated. The CMS typically raises the final reimbursement from the advanced notice.

"With most anticipating some improvement in the effective growth rate," the rates come as a disappointment for companies operating in the Medicare Advantage market who are likely to see continued margin pressure, Evercore ISI analysts said in a note.

The "no improvement represented our worst-case scenario," TD Cowen analysts wrote in a note.

Leading the decline was Humana, slumping 8.8 per cent , as its business is focused on the Medicare Advantage market.

UnitedHealth fell 4 per cent , while CVS Health tumbled 5 per cent .

The closely watched proposal decides how much insurers can charge for monthly premiums, plan benefits they offer and, ultimately, their profits.