Health insurance stocks rise on 'best case scenario' Medicare payment rates

April 8 (Reuters) - Shares of U.S. health insurers jumped on Tuesday after a bigger-than-expected increase in the government's reimbursement rates for Medicare Advantage plans in 2026, bringing some relief to a sector burdened with elevated medical costs.

Industry bellwether UnitedHealth Group's UNH.N shares rose nearly 6% in premarket trading, while Centene CNC.N and CVS Health CVS.N also saw increases of 5% to 6%, further boosting a sector that has largely held firm amid a recent market rout.

The U.S. announced a 5.06% average increase in payments to private insurers that run Medicare Advantage plans for people aged 65 and older. The increase was more than double the amount proposed in January, and contrasts with the 0.2% decline in 2025 reimbursement rates.

A best-case scenario 2026 final MA rate notice coupled with rising tariff risk make health insurers a strong relative safe haven, Baird Research analysts wrote in a note to clients.

The Centers for Medicare & Medicaid Services said the rate change primarily takes into account additional data on rising costs for insurers, including payment data through the fourth quarter of 2024.

Health insurance stocks had a rough 2024 with most companies ending the year in the red due to low government payments, high medical costs and a public backlash against the sector after the murder of a UnitedHealth executive.

However, some stocks have survived a recent market rout as worries over a trade war escalate. Centene and Molina Healthcare MOH.N notched gains in share prices last week, even as broader markets plunged after President Trump's tariff announcement.