On Monday night, the Centers for Medicare & Medicaid Services (CMS) released the Advance Notice for calendar year 2027 Medicare Advantage payment rates. The proposal estimates that payments to Medicare Advantage plans – private insurers that provide coverage for most Medicare services – will rise by just 0.09% compared with the current year. That figure is dramatically below expectations, as analysts had forecast increases in the 3%-6% range, and the current 2026 boost was over 5%.
Officials say this near-flat increase reflects updated cost trends, quality scores, and changes in the way risk adjustment is calculated, all in an attempt to improve payment accuracy and sustainability.
Health Insurers Get Hit Hard
The market’s reaction was swift and sharp. Major health-insurance stocks fell dramatically on Tuesday as news of the proposal spread:
- UnitedHealth Group plunged almost 20%, one of the largest single-day drops in the company’s history.
- Humana shares dropped more than 20%.
- CVS Health shed roughly 13%.
- Elevance Health, Centene, and Molina all saw significant declines.
Combined, the rout wiped out $96 billion in market capitalization for the sector.
Investors were caught off guard because they had expected a more generous rate increase – not something that could squeeze the margins for companies deeply dependent on Medicare Advantage revenue.
Why This Matters
Medicare Advantage is one of the fastest-growing parts of the U.S. health-insurance market, covering tens of millions of seniors and people with disabilities nationwide. Federal payment rates are critical because they determine how much insurers are reimbursed for taking on the financial risk of caring for these beneficiaries.
Insurers had grown accustomed to payment growth that exceeded underlying healthcare cost trends; this shift signals that policymakers may be focusing more aggressively on cost containment and payment accuracy than on insurer profitability.
Political and Policy Backdrop
The proposal comes amid broader political pressure on healthcare costs. President Trump and CMS leadership have publicly criticized high insurer profits and certain billing practices, suggesting that insurers should profit less.
CMS is also proposing changes to risk-adjustment methods and tightening rules around how insurers document health conditions – steps that may further affect future payments.
What’s Next
This is still a proposed rule. There will be an open comment period before CMS finalizes the 2027 payment rates – potentially in April 2026. Insurers and industry groups are expected to lobby vigorously to push for a higher final rate.
For now, markets and policymakers alike are watching closely, because decisions on these rates can ripple through the broader healthcare system and affect plan offerings, benefits, and enrollment in the year ahead.
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