Lower Medicare rates impact CVS, Humana, and other health stocks

On Tuesday morning, federal regulators announced that government payments to Medicare Advantage and Medicare Part D programs will increase by an average of 3.7% or $16 billion year-over-year in 2025. However, this news did not sit well with several health insurance companies, including Humana, CVS Health, UnitedHealth, and Elevance Health.

Humana, the nation’s second-largest Medicare Advantage health insurer, saw a 12% decrease in its stock after the rate increase announcement. UnitedHealth stock fell by 6%, CVS Health shares slid by 8%, Centene Corp. stock fell by 5%, and Elevance Health stock dropped by 4%. The rate increase announced by CMS is the same as a rate proposal made in January, and over the past 10 years, final rates were not increased from their initial proposal only once.

During an investor call in March, Humana CFO Susan Diamond expressed disappointment in the rate increase, stating that it may be challenging for the company to reach its goal of boosting earnings by $6 to $10 without a bigger increase in payments. This news comes as other pharma companies face challenges such as the weight loss drug shortage affecting Eli Lily’s ZepboundOzempic and backlash over the low cost of producing the drug.

By Riley Johnson

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