WASHINGTON, 27 January 2026 — Shares of major U.S. health insurers fell sharply in premarket trading after the U.S. government proposed a smaller-than-expected increase to Medicare Advantage payment rates for 2027, raising fresh concerns over margin pressure as medical costs continue to rise.
The U.S. Centers for Medicare and Medicaid Services (CMS) said late Monday that Medicare Advantage payment rates would rise by just 0.09% in 2027, resulting in more than US$700 million in additional payments. The proposal fell well below market expectations, with analysts previously forecasting an increase of up to 6%.
In premarket trading on Tuesday, UnitedHealth shares were down around 8%, while CVS Health fell about 9%. Humana recorded the steepest decline, sliding nearly 14%.
Analysts warned that the proposed rate increase may be insufficient to offset rising healthcare utilisation and cost trends, potentially forcing insurers to scale back benefits or exit certain plans.
“Simply put, the potential rates compared to the cost trend will likely be insufficient and require significant benefit reductions or plan exits to offset 2027 margin pressures,” said Baird analyst Michael Ha.
The marginal increase comes at a challenging time for insurers offering Medicare Advantage plans to older adults, as the sector continues to grapple with elevated medical costs following years of higher-than-expected utilisation.
“This rate is below our and Street expectations, and we believe the implementation of the rule will likely result in a delay of the embedded earnings story for companies with meaningful exposure to Medicare Advantage,” said Mizuho analyst Ann Hynes.
Medicare Advantage payment rates are typically finalised in early April, leaving room for potential revisions. However, some analysts cautioned that even with adjustments, expectations for a significant uplift remain low.
“Generally, the proposed update is better in the final. Certainly, some politics could be at play, but this update falls well below expectations,” said Leerink analyst Whit Mayo. He added that it was highly unlikely the timing of the release of the advance notice, just ahead of UnitedHealth’s earnings, was a coincidence.
UnitedHealth, widely viewed as an industry bellwether, is scheduled to report its fourth-quarter results on Tuesday. Investors are expected to focus closely on management commentary regarding the potential earnings impact of the proposed Medicare Advantage rates.
CMS said the proposed update reflects underlying cost trends, 2026 quality ratings, and changes to the risk adjustment model, under which insurers receive higher payments for covering sicker patients.
