MW UnitedHealth, Humana and other health-insurance stocks are surging after this 'big win'

By Emily Bary

The Centers for Medicare and Medicaid Services announced higher-than-expected Medicare Advantage payment rate increases for 2026

The Centers for Medicare and Medicaid Services set next year's Medicare Advantage payment rates above expectations, in a move that lifted health-insurance stocks during Monday's extended session.

The CMS announced a 5.06% expected average change in revenue for 2026 Medicare Advantage rates. That was above the 2.23% number previously put out in an advance notice - and well above what investors were expecting, according to Mizuho analyst Ann Hynes.

"Given how difficult the [Medicare Advantage] regulatory environment was over the past three years under former President Biden's administration, this improvement under President Trump should be a meaningful positive sentiment driver for the group" of insurance stocks, she continued.

Hynes added that "rates over the past three years have not fully reflected the elevated [Medicare Advantage] utilization environment." That dynamic had been a source of pressure on many insurance stocks last year.

But Humana Inc.'s stock $(HUM.UK)$ rose more than 11% in Monday's after-hours action, while CVS Health Corp.'s stock $(CVS)$ gained 6.5% and UnitedHealth Group Inc.'s stock $(UNH)$ advanced nearly 6%.

See also: UnitedHealth now has to fight the government on another front

The rally in Monday's extended trading sets up CVS's stock to extend its lead as the S&P 500's SPX biggest year-to-date gainer. The stock was already up 42% on the year through Monday's close, ahead of Philip Morris International Inc.'s stock (PM), which was next up with a 26% gain over the course of 2025.

Hynes flagged that Humana is most exposed to Medicare Advantage, which makes up about 38% of the insurer's membership and more than 80% of its revenue. At UnitedHealth, she said Medicare Advantage accounts for about 15% of medical membership and more than 30% of revenue, and at CVS, those numbers are about 16% and 19%, respectively.

Those three insurers could benefit most from the latest developments, but Elevance Health Inc. (ELV) and Centene Corp. $(CNC)$ also have exposure to the category, according to Hynes. Elevance's stock rose nearly 6% and Centene's gained more than 4% in after-hours trading Monday.

Hynes called the new rates "a big win for managed care." That's in contrast to last year, when less favorable rates for the insurers sent their stocks sinking after the CMS announcement.

-Emily Bary

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

April 07, 2025 20:14 ET (00:14 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.