Medicare Advantage (MA) payment rates will increase by just 0.09% in 2027, the Centers for Medicare and Medicaid Services said late Monday. Analysts had expected an increase of as much as 6%.The marginal increase is disappointing for insurers that offer insurance for the elderly and are struggling with rising medical costs.
Simply put, potential rates compared to cost trends will likely be insufficient and require significant benefit reductions or exit plans to offset margin pressure in 2027, says Baird analyst Michael Ha.
Some analysts said the proposal amplifies downside risk to MA’s profitability and highlights regulatory uncertainty as a near-term headwind for insurers’ stocks.
“If rates are in this range, membership growth will remain low as MA plans must cut benefits and strengthen networks to enable continued margin improvement in this low interest rate environment,” said Bernstein analyst Lance Wilkes. Medicare Advantage rates are typically finalized in early April.
“Overall, the proposed update is better in the final. There may certainly be some politics at play, but this update falls well below expectations,” said Leerink analyst Whit Mayo.
It was highly unlikely that the publication of the Advance Notice before UnitedHealth’s revenues was a coincidence, he said.
The sector indicator on Tuesday reported fourth-quarter earnings that marginally topped Wall Street expectations. However, the company said sales would shrink in 2026, putting further pressure on the shares.
The government said the update reflects underlying cost trends, quality assessments for 2026 and changes to the risk adjustment model, with insurers paid more if their patients are sicker. (Reporting by Sriparna Roy and Mrinalika Roy in Bengaluru; Editing by Shilpi Majumdar)
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