UNH, HUM, CNC Stocks Rally On Medicare Advantage Rate Surprise

• This increase implies $13 billion in additional payments to Medicare insurers for the year, the agency said.
• Shares of UNH, CNC, HUM and ELV rallied between 5% and 11% at the time of writing.
• UnitedHealth is the largest provider of private Medicare Advantage plans in the U.S.

Shares of insurers UnitedHealth Group (UNH), Centene (CNC), Humana (HUM), and Elevance Health (ELV) jumped in Monday’s extended trading hours after the Centers for Medicare & Medicaid Services announced that the payments to private insurers offering Medicare Advantage plans will increase 2.48% next year.

This increase implies $13 billion in additional payments to Medicare insurers for the year, the agency said.

“When accounting for estimated risk score trend in MA due to factors such as population changes and coding practices, this amounts to a 4.98% increase,” the agency added.

The Unexpected Hike

The move came as a surprise since in January, the CMS had proposed a roughly flat increase in payments for private Medicare plans the following year, sending shares of insurers down and wiping out about $100 billion in stock market value. The announcement further comes as a relief to the industry plagued by concerns over rising medical costs.

Shares of UNH, CNC, HUM and ELV rallied between 5% and 11% at the time of writing. Shares of Aetna parent CVS Health (CVS) rose by about 6.5% while Molina Healthcare (MOH) stock rose a modest 3%.

While UnitedHealth is the largest provider of private Medicare Advantage plans in the U.S., Humana is the second largest.

How Did Retail Traders React?

On Stocktwits, retail sentiment around UNH stock rose from ‘bullish’ to ‘extremely bullish’ territory over the past 24 hours, while message volume increased from ‘normal’ to ‘high’ levels.

Sentiment around HUM stock, meanwhile, increased from ‘neutral’ to ‘extremely bullish’ territory over the past 24 hours, while message volume rose from ‘normal’ to ‘extremely high’ levels.

A Stocktwits user expressed hopes for Wall Street analysts weighing in on the impact of the rate on UNH stock on Tuesday.

Another applauded the announcement.

Yet another user noted that analysts were expecting a lower rate.

While UNH stock fell 46% over the past 12 months, HUM stock fell 28%. 

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