Health insurance stocks decline due to underwhelming Medicare Advantage rates

Humana’s Earnings Decline Adds Pressure on Medicare Advantage Businesses and Struggling Insurers Amid Challenges

On Saturday, February 2, 2019, Humana Inc.’s office building in Louisville, Kentucky displayed signage indicating that the company was set to release its earnings figures on February 6. However, Humana’s stock experienced a decline of over 10%, adding additional pressure to insurers already facing high medical costs and challenges resulting from the recent cyberattack on UnitedHealth Group’s tech unit.

The announcement of Humana’s earnings has put additional scrutiny on Medicare Advantage businesses, which have historically been sources of growth and profits for the insurance industry. Medicare Advantage is a privately run health insurance plan contracted by Medicare, with over half of Medicare beneficiaries enrolled in such plans due to lower premiums and additional benefits not covered by traditional Medicare.

On Monday, February 4th, the Centers for Medicare and Medicaid Services (CMS) announced that government payments to Medicare Advantage plans are expected to increase by 3.7% compared to the previous year. However, after accounting for certain assumptions, this translates to a 0.16% decline in the final rate. This final rate remains the same as a proposal made in January despite CMS usually increasing the rate from the initial proposal.

The rate set by CMS dictates how much insurers can charge for monthly premiums and plan benefits offered to customers, ultimately impacting their profitability. The decline in payment rates will put further pressure on insurers already struggling with high medical costs and other challenges facing their business models.

In conclusion, Humana’s earnings announcement has added more pressure on insurers already facing challenges arising from recent cyberattacks and declining payment rates from CMS. The situation highlights how important it is for policymakers to address these issues and ensure that insurance companies are able to provide affordable coverage options while maintaining profitability.

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