UnitedHealth Group shares surged more than 8% after federal regulators unveiled a stronger-than-expected Medicare Advantage payment increase, delivering relief to the health insurance giant and the broader managed-care sector.
The stock jumped from its Monday close of $281.41 to above $305 in intraday trading following the announcement by the Centers for Medicare & Medicaid Services, marking a gain of roughly 8.5% in a single session.
The latest rally comes after a brutal stretch for the stock.
UnitedHealth shares plunged in the wake of UnitedHealthcare CEO Brian Thompson’s killing in December 2024 and continued sliding in the months that followed, with analysts pointing to a mix of reputational fallout, rising costs and regulatory pressure weighing on the company.
CMS said it will raise Medicare Advantage payments by an average of 2.48% in 2027 — a sharp increase from the 0.09% bump it proposed earlier this year.
When factoring in estimated risk-score trends, the agency said payments would rise 4.98%.
The reversal from a near-flat proposal to a multibillion-dollar increase sent insurer shares sharply higher.
UnitedHealth Group, the largest Medicare Advantage insurer by enrollment, is particularly sensitive to those government reimbursement levels, with even modest changes having an outsized financial impact.
It collects fixed monthly payments from the federal government for each enrollee.
CMS estimated the finalized rate will result in more than $13 billion in additional payments to insurers in 2027.
Earlier this year, the outlook looked far less favorable.
The agency’s initial proposal raised concerns that insurers would face mounting margin pressure as medical costs climb.
The biggest shift came from CMS stepping back from a proposed overhaul of its risk-adjustment model.
Regulators had floated updating the model using more recent data, a move that would have reduced payments to insurers.
Instead, CMS opted to maintain the current model for 2027, citing a need to give the Medicare Advantage market more time to adjust.
That decision significantly reduced the negative impact from risk-model changes and accounted for a large portion of the upward revision in the final rate.
The move signaled a more measured approach from regulators as they aim to support the program while maintaining payment accuracy.
Other managed-care stocks also climbed following the announcement as investors recalibrated expectations for revenue and profitability heading into 2027.
Still, the impact is especially pronounced for UnitedHealth given its scale.
The company serves millions of Medicare Advantage enrollees and derives a substantial portion of its revenue from CMS payments, meaning changes to federal reimbursement rates flow directly into its financial outlook.
This story originally appeared on NYPost
