Trump’s boost to insurers could cost Americans on Medicare Advantage plan a whole lot more

Insurance companies are cautiously optimistic about the Trump administration’s policies for their industry: insurers saw their stocks soar in early April when the federal government announced a record 5.06% benchmark increase to Medicare Advantage plans.

That is more than double the rate (2.23%) proposed by the [Biden administration] (https://www.barrons.com/articles/humana-cvs-unitedhealth-stock-medicare-advantage-7dee3cc7) in January 2025, which was seen as a budget cut by the insurance industry. The Trump administration increase will amount to $25 billion for insurers like Humana and UnitedHealthcare, which participate in the revitalized Medicare Advantage program.

Advocates highlighted that program costs have seen margins fall sharply in the insurance sector. Enrolled older adults have used more care than anticipated since the pandemic, and many insurers have already cut benefits, exiting some markets to remain profitable. The increased funding is expected to make health insurance companies a haven on the stock market during an unpredictable and volatile time.

Lo and behold, both Humana and UnitedHealthcare’s first quarter earnings caused the companies’ stocks to drop precipitously on April 16.

Adding to the pinch, the Trump administration also enacted changes that will make it harder for insurers to inflate their profits. These changes are expected to dull the shine of the increased funding and may make companies even more reluctant to pass on savings to customers.

The Medicare Advantage program has not been without its critics since its inception in the Balanced Budget Act of 1997.

The program uses taxpayer dollars to pay private insurers for coverage for older adults and those with disabilities. Medicare Advantage was introduced by Republican Representative John Kasich in the omnibus, and the Democrats have been critical of using public funds to pay private companies through the program.

How much the federal government spends on Medicare Advantage influences its monthly premiums and plan benefits. There is no baseline of coverage across the different private insurers who participate in the program.