Medicare Proposal Causes Health Insurance Stocks to Plummet
Written by Emily J. Thompson, Senior Investment Analyst
Source: CNBC
- Market Reaction: The Trump administration's Medicare proposal led to significant declines in health insurance stocks, with Humana plunging nearly 14% in after-hours trading, while CVS Health and UnitedHealth Group each fell over 10%, reflecting market dissatisfaction with the proposal.
- Payment Rate Adjustment: According to the Centers for Medicare and Medicaid Services, the average payment increase for Medicare Advantage plans in 2027 is only 0.09%, far below Wall Street analysts' expectations of 4% to 6%, which will directly impact insurers' profitability.
- Industry Impact: If the proposal holds, Medicare Advantage plans are expected to receive over $700 million in payments in 2027, affecting insurers' monthly premiums and plan benefits, thereby influencing their profit margins.
- Policy Objectives: CMS stated that the proposal aims to improve payment accuracy and ensure that Medicare insurers are adequately reimbursed, intending to provide beneficiaries with more cost-effective choices while protecting taxpayers from unnecessary spending.
Analyst Views on CVS
Wall Street analysts forecast CVS stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for CVS is 96.71 USD with a low forecast of 91.00 USD and a high forecast of 105.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
17 Analyst Rating
16 Buy
1 Hold
0 Sell
Strong Buy
Current: 83.010
Low
91.00
Averages
96.71
High
105.00
Current: 83.010
Low
91.00
Averages
96.71
High
105.00
About CVS
CVS Health Corporation is a health solutions company. The Company's segments include Health Care Benefits, Health Services, Pharmacy & Consumer Wellness and Corporate/Other. Health Care Benefits segment offers a broad range of traditional, voluntary and consumer-directed health insurance products and related services, including medical, pharmacy, dental and behavioral health plans, PDPs and Medicaid health care management services. Health Services segment provides a full range of pharmacy benefit management (PBM) solutions through its CVS Caremark operations and delivers health care services in its medical clinics, virtually, and in the home. Pharmacy & Consumer Wellness segment dispenses prescriptions in its CVS Pharmacy retail locations and through its infusion operations, provides ancillary pharmacy services including pharmacy patient care programs, diagnostic testing and vaccination administration, and sells a wide assortment of health and wellness products and general merchandise.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
