MA Insurers Sounding Alarms They May Not Maintain Growth Due to Rate Cuts

Medicare Advantage insurers are struggling to maintain strong projections of growth following the news of very meager reimbursement rate reductions.

The Centers for Medicare and Medicaid Services (CMS) anticipates that the 0.16% reduction in the MA benchmark rate in 2025 will come as an effect of modifications to the diagnostic coding system in order to get control of runaway misuse of risk assessments. Additionally, according to Modern Healthcare, UnitedHealthcare, Humana and Aetna have all warned investors that spending on MA members outpaced projections at the end of 2023. Whatever proposal CMS offers for the MA final rule this year is unlikely to increase reimbursement enough to settle shareholder concerns.

Following news of the federal rate proposal, Humana’s stock fell roughly 4%. Stock prices for UnitedHealthcare’s parent company UnitedHealth Group, Centene and CVS also fell. The Wall Street Journal reports that Humana’s shares have been under pressure since it disclosed that higher than usual medical costs are anticipated to continue into 2024 and potentially become the new norm.

Centene is also threatening to scale back benefits following the anticipated “cuts.” The insurance company announced in an investor call that the phase-in of risk adjustment fixes will bring down reimbursement so substantially that it won’t keep up with expectations for medical cost trends. Modern Healthcare also notes that Centene’s Medicare Advantage membership dropped 15% to 1.2 million at the end of 2023.