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Key Takeaways
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Shares of health insurance operators surged Tuesday after the government said it would pay a higher rate to Medicare insurers than previously estimated.
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Humana, UnitedHealth, and Aetna owner CVS were among those that saw share gains.
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The higher rate could help ease the funding pressure insurers face, UBS analysts said.
Shares of health insurance operators surged Tuesday after the government said it would pay a higher rate to Medicare insurers than previously estimated.
Humana (HUM) shares jumped over 9% in recent trading and UnitedHealth Group (UNH) rose 6%. CVS (CVS), which owns Aetna, climbed about 8%.
The Centers for Medicare & Medicaid Services said Monday that payments to Medicare advantage plans will increase more than 5% on average, above the 2.83% the government said it anticipated in January. That increase “should ease some of the funding pressure” the insurance companies face, UBS analysts said.
Humana could now have an “easier path” to return to hitting margin targets, UBS said. UnitedHealth, which is operating at target margins already, could gain more flexibility to drive enrollment growth, the analysts added.
For CVS, this also comes as the Aetna parent said it now expects to meet or exceed its previous full-year earnings outlook.
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