A proposal for lower-than-expected Medicare Advantage rates in 2024 has sent shares of publicly traded health insurers falling.
UnitedHealth Group Inc.’s UNH,
The Centers for Medicare and Medicaid Services on Wednesday proposed new Medicare Advantage rates for 2024, including a core rate increase of 2.09%. Rates have averaged 3.3% over the past five years, according to Oppenheimer analyst Michael Wiederhorn. A final decision is expected April 3.
“While the result is disappointing, the industry has been the beneficiary of some healthy increases in recent years,” Wiederhorn told investors. “Additionally, we note that over the last five years, the final rule has come in 1.0% better than the proposal, on average.”
Mizuho Securities analysts noted that the rate is lower than expected but still view the proposal as positive for managed-care companies.
“While the lower rate [year over year] could impact benefits offered to Medicare beneficiaries, we believe it will allow the industry to continue to grow in the high-single digits,” Mizuho analyst Ann Hynes wrote in an investor note. “While the Biden administration has discussed potential reforms to Medicare Advantage, we do not believe the Biden administration will make major structural changes to the MA program this year.”
The Health Care Select Sector SPDR ETF XLV,