Shares of U.S. health insurers jumped on Tuesday after a bigger-than-expected increase in the government’s reimbursement rates for Medicare Advantage plans in 2026 signaled some relief for a sector burdened with steep medical costs.
Medicare-focused insurer Humana (HUM.N), opens new tab led gains with a 16% jump, while other health insurers including UnitedHealth Group (UNH.N), opens new tab, Centene (CNC.N), opens new tab and CVS Health (CVS.N), opens new tab advanced between 5% and 10%.
The 5.06% average increase, more than double what the government proposed in January, could help profit margins in the sector after a post-COVID surge in demand for medical procedures drove up costs.
The “rich final rate” also signals a supportive posture by U.S. President Donald Trump’s administration towards Medicare Advantage plans, Jefferies analysts David Windley and Steven Couche wrote in a research note.
The magnitude of the increase versus the provisional rates “reinforces a politically-influenced, ‘more art than science’ reality to rates,” they said.
The Republican-controlled U.S. Senate voted last week to confirm Dr. Mehmet Oz, the celebrity physician nominated by Trump, to oversee Medicare and Medicaid.
The rate the U.S. government pays to private health insurers to manage Medicare for people aged 65 and older or with disabilities influences the monthly premiums these companies charge, the plan benefits they offer and, ultimately, their profits.
The Centers for Medicare & Medicaid Services had earlier proposed a 2.2% increase in 2026 payments.
The agency said the rate change mainly accounts for additional data on rising costs for insurers, including payment data through the fourth quarter of 2024.
Health insurance stocks had a rough 2024 due to low government payments, high medical costs and public backlash against the sector after the murder of a UnitedHealth executive.
But more recently, some stocks have performed well despite a market rout triggered by escalating worries over a trade war. Centene and Molina Healthcare (MOH.N), opens new tab notched gains last week, when broader markets plunged after Trump’s tariff announcement.