Health insurance stocks hurting on 2025 Medicare Advantage rates

Insurance providers CVS Health (CVS), UnitedHealth Group (UNH), and Humana (HUM) are seeing stock declines ahead of Tuesday's market open as the Biden administration remained adamant on its stance on Medicare Advantage payment rates, ultimately coming below what insurance companies were demanding.

Yahoo Finance Live explains the finalized Medicare Advantage pay rates' impacts on the greater healthcare sector.

For more expert insight and the latest market action, click here to watch this full episode of Morning Brief.

Editor's note: This article was written by Luke Carberry Mogan.

Video Transcript

BRAD SMITH: Time for today's stock to watch. Shares of health insurance stocks Humana, UnitedHealth, and CVS, who owns Aetna, all taking a hit in the premarket after the Biden administration announced final Medicare Advantage rates will remain unchanged in 2025.

You're taking a look at the share price reaction here in the extended hours. In the pre-market, Humana down the most on a percentage basis right now, down a little more than 11% right now, while CVS down 7%. Roughly, UnitedHealth down 5%.

JARED BLIKRE: Yes, a picture is worth a thousand words. Let's go to the YFi interactive, where we have my Pharmacy Benefit Managers heatmap here. You can see UnitedHealth, that is a big square. It was down 1% yesterday, down another 5.02% in the pre market, Humana here down 11%, CNC down 3.3%, and overall, the health care sector, XLV that is down 1.24%. I do have a quote from some street analysis here, Bloomberg Intelligence saying on the Medicare decision, their final payment reduction for 2025, quote, "reinforces the challenging environment for health plans like Humana, UnitedHealth, and CVS." The cut comes as federal scorekeepers project slower mid single-digit enrollment growth over the next five years and near term uncertainty over medical cost trends, so just kind of being caught wrong-footed from an expected event here has just led to these declines.

BRAD SMITH: Yeah, absolutely. We'll see how this continues to impact these names going into the trading day. We know that the Department of Health and Human Services, as well, has been looking at more data on the Medicare drug price negotiations, new data on how the law lowers health care costs for women, especially as they have been targeting, and particularly within one of the releases out this morning.

They said within this at least, the administrator has said the women throughout the country are disproportionately impacted by high health care costs. The Inflation Reduction Act bridging this gap by lowering prescription drug costs and making health care more accessible for women and all people with Medicare here. So we'll continue to track these names closely going into the opening bell.