Payers' stocks, which remained strong through 2022, could take a hit in 2023 as the Federal Reserve relaxes interest rate hikes and federal regulators tighten rules around Medicare Advantage, The Wall Street Journal reported Jan. 23.
Analysts told the Journal that historically, insurers' stocks have tended to underperform when tightening cycles end. Payer stocks tend to outperform the market during tightening cycles, when the Fed ups interest rates.
On top of changes from the Fed, upcoming adjustments to Medicare Advantage risk adjustment data validation could also spell trouble for insurers, according to the Journal.
CMS will announce its final rule for updating the RADV process Feb. 1. In its proposed rule, the agency excludes the fee-for-service adjuster, which allows MA plans a permissible number of payment errors. It could also apply the rule retroactively.
Industry leaders have warned if CMS goes ahead with eliminating the fee-for-service adjuster, payers will likely resort to litigation.
On Jan. 13, investors asked UnitedHealth Group executives about the potential impact of CMS publishing the final RADV rule.
"Risk adjustment is really critical to providing broad and equitable access inside the Medicare Advantage program," UnitedHealth's Medicare CEO Tim Noel said. "Also a really important part of ensuring there's no disincentives for caring for the most vulnerable. We also continue to remain very supportive of additional transparency. Here, that takes the form of more timely and consistent reviews."
Specifically, Mr. Noel said the company hopes CMS includes the fee-for-service adjuster to directly compare MA and traditional Medicare plans in its audits, and that the agency does not "conduct these audits decades in arrears."
"The whole MA program is unbelievably successful and a popular program for seniors across the U.S.," CEO Andrew Witty added. "The biggest proof of that is the number of folks who every single year volunteer to sign up to be part of this program. And we're seeing another record year of enrollment coming through as we speak."
Though analysts told the Journal that CMS is likely to water down its proposed rule, MA plans are still at risk because CMS "ultimately believes it is overpaying."
Nearly every major insurance company has faced allegations of Medicare Advantage fraud.
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