Largest insurer shares tumble after modest Medicare payment increase

The health insurance sector saw a deep sell‑off Tuesday, led by a plunge in the shares of the largest insurer after the Trump administration announced a modest 0.09% rise in Medicare Advantage payment rates for 2027, far below the 6% analysts had expected.

The largest insurer dropped almost 20%, while two other major insurers each fell around 14%. The smaller‑than‑expected proposal comes at a time when margins are tight; the largest insurer reported a medical care ratio of 89.1%, meaning it spends $0.89 of every premium dollar on medical claims.

The largest insurer carries roughly 30% of national Medicare Advantage enrollment, and the second‑largest carries about 17%. Shares of the second‑largest also fell more than 20% after the news.

The tiny increase follows a 5.06% rise for 2026, which was higher than expected. Final numbers for 2027 are expected to be finalized by April 6, according to analysts.

An industry group said that if the proposal is implemented, it could lead to benefit cuts and higher costs for 35 million seniors and people with disabilities when they renew their coverage in October 2026. Analysts noted that the proposal adds another headwind for the sector, further stressing industry fundamentals.

The largest insurer also suffered a secondary hit when it reported fourth‑quarter and full‑year 2025 revenues that fell short of estimates—$113.2 billion vs $113.7 billion and $447.6 billion vs $447.9 billion—though both figures were up 12% from a year earlier.

The insurer expects 2026 revenue to stay above $439 billion, a 2% decline from the previous year due to “right‑sizing across the enterprise.” Earnings per share for the quarter were $2.11, matching expectations but about 70% lower than the same quarter in 2024. It also disclosed a $799 million hit to full‑year revenue from a cyberattack on its subsidiary in February 2024.

Investors will receive earnings reports from the second‑largest insurer on Wednesday, while the other major insurers are scheduled to report in February.