The US government said it will raise payments to private insurers offering Medicare Advantage plans in 2027 by 2.48% on average. That came in well above the near-flat January proposal and sent insurer stocks sharply higher after hours.
A Medicare agency official told reporters insurers will also get a 2.5% benefit tied to a change in risk-assessment payments linked to patient health status. That brings the overall increase to about 5%.
Investors moved fast. Shares of UnitedHealth, Humana, and CVS climbed between 8% and 14% in extended trading as the final rate landed far above the January draft, which had proposed only a 0.09% increase for 2027. The market hated that earlier number. This one, plainly, landed better.
The Centers for Medicare & Medicaid Services said the increase will generate more than $13 bn in additional payments to Medicare Advantage plans in 2027.
The payment rate came as a relief for investors and gave insurers a more favorable framework for projecting medical costs in 2027.
Major health insurers also stand to gain from a pause in changes to how CMS models risk for insurers. He estimated the final rate outcome is closer to 3.5% to 4% once other payment changes are factored in. He called it a win.
CMS officials said the pause on the risk-policy change is meant to give insurers and providers more time to adjust to other structural payment changes already in motion.
One agency official said insurers have dropped some capitated plans, which pay a fixed amount per member and aim to reduce costs, while some providers have left Medicare Advantage networks.
Health insurers had argued the January proposal did not reflect the pressure from rising medical costs.
Health plans will keep focusing on making coverage and care as affordable as possible as they work through the latest policy changes and manage a period of sharply rising medical costs.
For comparison, the government set the final 2026 Medicare Advantage reimbursement rate at an average increase of 5.06% after first proposing a 2.2% rise.
