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By Mariam Sunny
(Reuters) -The U.S. announced a 5.06% average increase in the government's final reimbursement rates for 2026 Medicare Advantage health plans run by private insurers, more than double the increase it proposed in January.
The rate the U.S. government pays to private health insurers to manage healthcare under Medicare for people aged 65 and older or with disabilities, influences the monthly premiums they charge, plan benefits they offer and, ultimately, their profits.
Higher rates will benefit large U.S. health insurers, including UnitedHealth Group and Humana, which have been grappling with steep medical costs related to government-backed Medicare and Medicaid plans.
Shares of UnitedHealth and Elevance Health rose about 6% in after hours trading, and those of CVS Health added 6.7%. Humana shares jumped 11.5% and Cigna rose 1% in extended trading.
The final rate indicates "visible evidence of Trump administration's support for MA program," said Bernstein analyst Lance Wilkes.
The Centers for Medicare & Medicaid Services (CMS), which oversees Medicare and Medicaid health insurance programs, had earlier proposed a 2.2% increase in 2026 payments. Last year, the government announced a 0.2% decline in the reimbursement rates for 2025.
The CMS said the rate change primarily takes into account additional data on the increase in costs for the insurers, including payment data through the fourth quarter of 2024.
"We're encouraged that CMS is supportive of this important program," a spokesperson for CVS said, adding that 88% of its Medicare Advantage members are currently enrolled in CMS' highly rated plans with 4 stars or more.
As insurers "review the new policies released in the last two days, they will continue to focus on helping seniors stay healthy, closing gaps in care and supporting those with chronic illness," said industry lobbying group America's Health Insurance Plans.
(Reporting by Mariam Sunny and Kamal Choudhury in Bengaluru and Amina Niasse in New York; Editing by Shinjini Ganguli)
