Shares of UnitedHealth Group (UNH.N) surged in premarket trading on Tuesday, leading a broad rally in US health insurers after the government unveiled a much larger-than-expected increase in 2027 Medicare Advantage payment rates.
The stock climbed 6.9%, positioning UnitedHealth as a key early beneficiary of the policy shift and signaling renewed investor confidence in its earnings outlook.
Peers includingCVS Health (CVS.N), Elevance Health (ELV.N), Centene (CNC.N), and Molina Healthcare (MOH.N) rose between 3.6% and 6%, while Humana (HUM.N) jumped more than 10%.
CMS announces significant payment hike
The Centers for Medicare & Medicaid Services (CMS) said late Monday it will increase payments to private insurers offering Medicare Advantage plans in 2027 by an average of 2.48%.
This revision is significantly higher than the 0.09% increase initially proposed in January. Analysts at RBC Capital Markets had expected a more modest rise of 1% to 1.5%.
Jefferies analysts said in a report, “We view the revision more as righting an actuarial wrong, not CMS backing off its disciplinarian stance toward MA plans.”
In addition, a CMS official said insurers would receive a further 2.5% benefit from changes to risk-adjustment payments based on beneficiaries’ health status, bringing the total increase to roughly 5%.
Financial implications for insurers and beneficiaries
CMS said the adjustment will generate more than [MONEY value=”13000000000″ currency=”usd” notation=”long” replace=”false”] in additional payments to Medicare Advantage plans in 2027.
Higher government payment rates influence insurers’ monthly premiums, plan benefits, and ultimately their profitability.
Insurers use these rates to prepare bids for 2027 Medicare Advantage contracts.
The finalized CMS rule includes several components, including adjustments to cost trends, 2026 Star Ratings for quality bonuses, and updated risk-scoring methods.
A key policy goal is to reduce discrepancies in diagnosis coding between Medicare Advantage and Original Medicare.
Policy goals and risk adjustment changes
CMS outlined three objectives for its risk-adjustment strategy: simplifying processes for plans and providers, fostering competition regardless of plan size, and aligning payments more accurately with beneficiaries’ health risks while ensuring program integrity.
Starting in 2027, CMS plans to exclude diagnosis entries from “unlinked” chart review records—those not tied to specific patient encounters—from risk score calculations.
The only exception will apply when a beneficiary moves from one Medicare Advantage organisation to another, ensuring continuity in risk assessment during such transitions.
This change is expected to significantly affect organisations that rely heavily on unlinked chart review submissions.
Earlier this year, US President Donald Trump proposed the “Great Healthcare Plan” to Congress, aiming to reduce prescription drug costs and insurance premiums.
The plan includes measures to adopt international drug pricing models and increase price transparency, according to a White House fact sheet.
With these regulatory changes, Medicare Advantage insurers are poised to benefit from a stronger financial outlook in 2027, while patients may see modest improvements in coverage options and plan offerings.
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