Managed care stocks tumble as Medicare Advantage proposes rate decrease in 2024

Managed care stocks are lower Thursday after Medicare Advantage proposed a rate decrease of 2.27% for 2024. This is below the 1-2% increase Oppenheimer analyst Michael Wiederhor was projecting for next year.

"Medicare Advantage proposed its annual advance notice, which would decrease rates by 2.27% in 2024, below our expectations for a 1-2% increase and compares to a 5% increase (+4.48% proposed) in last year's rulemaking process and a 3.3% average increase over the last five years," Wiederhor commented.

The news has seen stocks like UnitedHealth Group Incorporated (NYSE: UNH), Humana Inc. (NYSE: HUM), Centene Corporation (NYSE: CNC), Elevance Health Inc. (NYSE: ELV), CVS Health Corporation (NYSE: CVS), and Cigna Corporation (NYSE: CI) down between 1-6% on Thursday. In fact, UnitedHealth is today's biggest loser in the Dow.

The analyst explains the proposed cut includes a core rate increase of 2.09%, a normalization factor of -3.12% and an expected -1.24% due to Star Ratings.

"Overall, while the result is disappointing, the industry has been the beneficiary of some healthy increases in recent years," the analyst commented. "Additionally, we note that over the last five years, the final rule has come in 1.0% better than the proposal, on average."

The proposal will be finalized on April 3rd.

By StreetInsider.com Staff

You May Also Be Interested In

• Baird cuts Caterpillar (CAT) and United Rentals (URI) on valuation, sees 15-20% downside risk
• William Blair sees a multiple risk for Palantir, reiterates Underperform
• UBS sees 'solid entry point' for PayPal (PYPL) shares as market not pricing in potential growth