Medicare Advantage Payment Boost Lifts Insurer Shares as CMS Widens 2027 Rates

A stronger-than-expected increase in 2027 payment rates for Medicare Advantage plans sends health insurer stocks higher and adds billions to plan funding

By Sofia Navarro ELV

Medicare Advantage Payment Boost Lifts Insurer Shares as CMS Widens 2027 Rates

ELV

U.S. health insurers rallied in premarket trading after the Centers for Medicare & Medicaid Services announced a larger-than-proposed average increase in 2027 Medicare Advantage payment rates. The change and an adjustment to risk assessment payments together lift expected funding to private Medicare plans by roughly 5%, translating into over $13 billion in additional payments for 2027.

Key Points

CMS will raise average Medicare Advantage payment rates by 2.48% for 2027, up from a 0.09% proposal in January.
A separate 2.5% adjustment to risk assessment payments tied to health status increases the total uplift to roughly 5%, according to a Medicare agency official.
CMS estimates the combined changes will add more than $13 billion in payments to Medicare Advantage plans in 2027, and stocks of major insurers rose in premarket trading on the news.

Shares of major U.S. health insurers climbed in early trading on Tuesday following a government announcement that will raise payment rates for Medicare Advantage plans in 2027 by more than initially proposed.

UnitedHealth surged 6.9% in premarket activity. CVS Health, Elevance Health, Centene and Molina Healthcare each rose in a range between 3.6% and 6%. Humana led gains among S&P 500 components, jumping 10.7% and becoming the best-performing stock in the index early in the session.

The Centers for Medicare & Medicaid Services said late on Monday it will increase payments to private insurers that offer Medicare Advantage plans by an average of 2.48% for 2027. That change is considerably higher than the 0.09% boost CMS had proposed in January.

Analysts at RBC Capital Markets noted the adjustment is meaningfully above their prior expectations of 1% to 1.5% for the 2027 rate. Jefferies analysts framed the revision as a correction to past actuarial estimates rather than a retreat from CMS enforcement, writing: "We view the revision more as righting an actuarial wrong, not CMS backing off its disciplinarian attitude towards MA."

In addition to the rate revision, a Medicare agency official told reporters on a call that insurers will receive an additional 2.5% boost from a change to risk assessment payments tied to enrollees health status. Taken together, CMS said the increases amount to roughly a 5% uplift.

CMS estimated the higher payment rates will translate into more than $13 billion in additional payments to Medicare Advantage plans in 2027. The government payment rate plays a direct role in how insurers set monthly premiums, determine plan benefits and estimate profitability. Insurers also use the rate as a basis for preparing their bids for Medicare Advantage contracts they plan to sell for 2027.

The market moves came as investors reacted to the larger-than-expected funding change and the accompanying adjustment to risk scores, which together increase the revenue backdrop for companies active in the Medicare Advantage space.

Note: The article references the ticker ELV in a related investment evaluation context appearing in market commentary and tools that assess stocks.

Risks

Future payment-rate adjustments remain subject to CMS policy decisions and could change before 2027, affecting insurers revenue and bid assumptions.
Changes in risk assessment methodology and how risk scores are applied could alter the effective funding insurers receive, affecting margins and plan pricing.

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Medicare Advantage Payment Boost Lifts Insurer Shares as CMS Widens 2027 Rates

Key Points

Risks

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