Health insurers rally after government lays out better-than-expected Medicare Advantage raise

Shares of major health insurers jumped Tuesday after the federal government announced a better-than-expected 2026 payment increase for Medicare Advantage plans.

The Centers for Medicare and Medicaid Services said Monday after markets closed that final rates are expected to increase more than 5% in 2026.

That wound up well above expectations, Leerink Partners analyst Whit Mayo said in a research note.

BTIG analyst David Larsen said separately that the final increase more than doubled what was initially proposed in January. He added that it likely accounts for higher care use that the program has seen recently.

Larsen also credited the new administration of President Donald Trump.

“The higher overall final rate is in line with our view that Republican administrations are generally more (Medicare Advantage)-friendly,” Larsen wrote. “While fraud, waste, and abuse are certainly a focus of the new administration, we view the final rate notice as a positive surprise.”

The rate increase is expected to cost taxpayers an additional $25 billion next year, CMS said. The Trump administration has vowed to trim the health department’s $1.7 trillion budget, although much of that money is spent on insuring the older, poor and disabled Americans through Medicare and the state- and federally funded Medicaid program.

Medicare Advantage plans are privately-run versions of the government-funded Medicare program mostly for people who are 65 and older.

Shares of the two largest Medicare Advantage plan providers, UnitedHealth Group Inc. and Humana Inc., climbed more than 7% and 12%, respectively, Tuesday morning. Other insurance stocks like Elevance Health Inc. and Centene Corp. also jumped.

The health sector was among the biggest gainers in a broader market rebound early Tuesday.