2 Healthcare Recession-Resistant Stocks Unaffected by Tariffs

Key Points

• Health insurance stocks are rebounding strongly in 2025 as they are tariff and recession-resistant safe havens for investors seeking shelter from volatility.
• Medicare Advantage reimbursements for 2026 will receive a 5.06% bump, more than double the earlier proposed forecast from the Centers for Medicare and Medicaid (CMS).
• CVS Health stock is up 54% year-to-date (YTD) after falling 43% in 2024 as its turnaround takes shape.

The medical sector stocks, notably the health insurance carriers, took a major drubbing in 2024 as Medicare Advantage (MA) plans continued to drive higher utilization costs, eating away at profits. These rising costs are illustrated by the medical benefits ratio (MBR), benefits expense ratio (BER), medical care ratio (MCR) or medical loss ratio (MLR), which is the percentage of premiums used to pay for medical services.

The Centers for Medicaid and Medicare Services (CMS) mandate a minimum MLR of 85%, but the higher the MLR ratio rises, the smaller the profits get. In 2025, health insurers are some of the market's best-performing stocks as they are tariff-free and recession-resistant. Here are 2 health insurers that are outperforming the benchmark indices that could continue to thrive in 2025.

Humana: The Second Largest Medicare Advantage Plan Provider is Up 11.3% YTD

As one of the first managed care organizations (MCOs) to sound the alarm of rising MA costs, Humana Inc. NYSE: HUM cut their forecasts two years out. While they intended to set the bar low in a kitchen-sink manner to improve results back up, the reality is the EPS results came in worse than forecasts while revenues often beat estimates. Humana stock lost 46% in 2024, closing at $253.70 on December 31, 2024.

However, the stock is trading up 11.3% year-to-date (YTD) as of April 14, 2025. Since tariffs don't directly impact health insurance stocks and are widely considered recession-resistant, these stocks have seen an influx of investors seeking a safe haven during this volatile market climate.

Medicare Advantage Plans Get a Surprise Boost in Reimbursement Rates

In an unexpected move, the CMS raised its MA reimbursement rates by 5.06% for 2026. This is more than double the traditional 2.23% increase the agency proposed in January. CMS said the rate change was in response to the rising utilization costs seen through Q4 2024. This will result in an additional $26 billion paid out to MA plan providers, of which Humana is the second largest, with approximately five million MA members. The news sent Humana shares higher by 12%.

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Medicare Advantage Star Ratings Could Cut Reimbursements by Up to $2 Billion

The increase could equate to an additional $5.4 billion in potential revenues, based on its 2024 total MA revenue of $117 billion. However, that amount doesn’t include the Star Ratings quality penalty that was assessed by CMS when members in MA plans with 4-star ratings or higher dropped from 94% to 25%. This could result in a $2 billion cut in bonus payments, resulting in only $3.4 billion in additional 2026 net MA revenues. Humana is actively challenging the Star Ratings drop in court, claiming calculation errors.

Was Q4 2024 Humana’s Last Kitchen Sink Quarter?

In its fourth quarter of 2024, Humana reported an earnings per share (EPS) loss of $2.16, still beating consensus estimates by 5 cents. Revenues rose 10.4% year-over-year (YoY) to $29.21 billion, beating the $28.81 billion consensus estimates. Its adjusted benefits ratio (Humana’s version of its MBR) rose 120 bps YoY to 91.9%, up from 90.7% in the year-ago period. Humana also expected MA membership to decline 550,000 or 10% from 2024 levels.

This rise signals worsening costs (rising inpatient utilization and drug costs), leading to tightening margins. However, the MLR rise across carriers prompted CMS to raise its reimbursements. The real wildcard will be how Humana fares in its lawsuit with CMS over its Star Ratings, with the potential benefit of clawing back penalties up to $2 billion.

CVS Health: Diversified MA Provider’s Turnaround Sends Stock Soaring by 54% YTD

Diversified integrated healthcare provider CVS Health Co. NYSE: CVS is already showing signs of a turnaround, and the market has noticed it by sending shares higher by 54% YTD as of April 14, 2025. CVS is more diversified than Humana as it operates medical provider services, pharmacy benefits management and health insurance (Aetna), serving an estimated 4.2 million MA members at the end of 2024.

However, management also stated that it planned to reduce MA membership by high-single digits in unprofitable regions in 2025. Its other businesses are improving to help mitigate the damage with its health insurance segment, as it experienced an alarming 630 bps YoY MBR surge from 88.5% in Q4 2023 to 94.8% in Q4 2024.

The 5.06% MA Reimbursement Rate Increase in 2026 Can Lift CVS Higher

With an estimated 4.2 million MA plan members, the 5.06% reimbursement rate increase could amount to upwards of a $3 billion increase in 2026 reimbursements if MA membership stays flat, not considering a potential 8% to 9% MA membership drop. CVS’s 2025 Star Ratings membership percentage was much higher at 88% versus Humana’s 25%.

CVS Health’s Profits Could See Acceleration in 2026

Unlike Humana, CVS Health is profitable. For the fourth quarter of 2024, CVS Health reported EPS of $1.19, beating consensus estimates by 28 cents. Revenues rose 4.2% YoY to $97.71 billion, beating consensus estimates of $97.09 billion. Its Health Care Benefits segment reported an adjusted operating loss of $439 million, down from an adjusted operating income of $676 million in the year-ago period.

The losses were primarily due to higher MA utilization and lowered MA Star Ratings (drop from 4.5 to 3.5 stars). Its Pharmacy & Consumer Wellness segment saw revenues surge 7.5% YoY in Q4 to $33.514 billion, and its Health Care Benefits segment revenues surged 23.3% YoY to $32.958 billion.

Full Year 2025 Forecasts Leave Room for Growth

Management issued inline guidance for 2025 with EPS of $5.75 to $6.00, with a midpoint of $5.88 vs $5.86 consensus estimates. Operating cash flow is expected to be around $6.5 billion. CVS Health CEO Dan Joyner commented on their strategy to shrink MA in 2025, “In line with our prior commentary, we expect that we will shrink the Medicare Advantage membership by high single digits percentage from year-end 2024.

 Our deliberate approach to our 2025 Medicare Advantage business combined with our improved star ratings will improve margins this year and are part of our ongoing commitment to restore this business to target margins of 3% to 5%.” With the 5.06% MA reimbursement increase, CVS Health has room to restore its target margins even higher in 2026.