Administrator for the Centers for Medicare & Medicaid Services Mehmet Oz speaks during an event sponsored by the Action for Progress Coalition, at the National Press Club in Washington, D.C., U.S., Feb. 2, 2026.
Al Drago | Reuters
The Trump administration on Monday finalized a 2027 payment rate increase to privately run Medicare plans that was far bigger than initially proposed, a boost to health insurer stocks and seniors whose out-of-pocket costs may end up lower than feared.
The government will increase average Medicare Advantage payments by 2.48%, or more than $13 billion, in 2027, according to a release from the Centers for Medicare & Medicaid Services. The Trump administration in January proposed a payment rate hike of 0.09%, which pummeled shares of insurers that run those plans.
Shares of UnitedHealth and CVS Health rose more than 9% in after-hours trading on Monday. Meanwhile, Humana‘s stock jumped around 12%.
The closely watched government payment rate determines how much insurers can charge for monthly premiums and plan benefits they offer and, ultimately, their profits.
The finalized rate can help insurers stabilize their businesses, with higher payments offsetting rising medical costs. The insurance industry has been pinched by an influx of people seeking care they delayed post-pandemic and high-cost specialty drugs like GLP-1s, among other factors.
But sufficient payments from the government also allow plans to keep premiums low for seniors and reduce out-of-pocket costs for patients, which attracts and retains members.
“Medicare Advantage and Part D should work for the people who rely on them,” said CMS Administrator Dr. Mehmet Oz in a release. “These updates keep coverage affordable and ensure patients get real value from their plans.”
Medicare Advantage has long been a key source of growth and profits for the insurance industry, driven by annual increases to government payment rates and obscure policies that have allowed insurers to “upcode” patients to appear sicker than they are and maximize those payments.
The rate increase isn’t “so awesome in a vacuum, but is certainly better” than the Trump administration’s initial proposal, said Mizuho health-care specialist Jared Holz in a note to clients late Monday. He said the boost may help companies expand margins in 2027 if they keep reducing benefits and managing expenses.
More than half of Medicare beneficiaries are enrolled in Advantage plans, enticed by lower monthly premiums and extra benefits not covered by traditional Medicare, according to health policy research firm KFF.
Source: www.cnbc.com
