(Reuters) -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, bringing some relief to a sector burdened with elevated medical costs.
The 5.06% average increase, roughly double of what was proposed by the government in January, could ease some pressure on insurers’ profit margins, which have been in flux since the COVID-19 pandemic due to strong demand for medical procedures.
Shares of Medicare-focused insurer Humana jumped the most, rising 11.2% in premarket trading, while other health insurers including UnitedHealth Group, Centene and CVS Health saw increases between 5% and 7%.
The “best-case scenario” rates, coupled with rising tariff risk make health insurance stocks a strong relative safe haven, Baird Research analysts said in a note to clients.
Some health insurance stocks have survived a recent market rout as worries over a trade war escalate. Centene and Molina Healthcare notched gains last week, even as broader markets plunged after President Trump’s tariff announcement.
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 they 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. Last year, the government announced a 0.2% decline in the reimbursement rates for 2025.
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 with most companies ending the year in the red due to low government payments, high medical costs and a public backlash against the sector after the murder of a UnitedHealth executive.
(Reporting by Manas Mishra in Bengaluru; Editing by Vijay Kishore)
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