US health insurers jump as 2026 Medicare payment rates exceed expectations

(Reuters) -The U.S. announced a 5.06% average increase in the government's final reimbursement rates for 2026 Medicare Advantage health plans run by private insurers, more than double the increase it proposed in January.

The Centers for Medicare & Medicaid Services (CMS), which oversees Medicare and Medicaid health insurance programs, had earlier proposed a 2.2% increase in 2026 payments.

The rate the U.S. government pays to private health insurers to manage healthcare under Medicare for people aged 65 and older or with disabilities, influences the monthly premiums they charge, plan benefits they offer and, ultimately, their profits.

Last year, the government announced a 0.2% decline in the reimbursement rates for 2025.

Large U.S. health insurers, including UnitedHealth Group and Humana, have been grappling with higher medical costs related to government-backed Medicare and Medicaid plans for more than a year.

Medical costs for insurers have climbed due to persistently high demand for healthcare services from older adults and an influx of sick patients in Medicaid plans, meant for lower-income enrollees, driven by changes in enrollment eligibility for these plans.

Shares of UnitedHealth rose 6.5%, Elevance Health gained 8.7%, CVS Health added 7.4% and Humana jumped 12.7% in extended trading.

The CMS said the rate change is primarily due to the inclusion of additional data on expenses for insurers, including payment data through the fourth quarter of 2024.

"By finalizing these payment policies, CMS is ensuring that Medicare Advantage continues to offer access to critical services in an efficient, accountable manner, further strengthening the program's ability to serve beneficiaries," the agency said in a statement.

(Reporting by Mariam Sunny in Bengaluru; Editing by Shinjini Ganguli)