CMS Expands Medicare Advantage Audits Impacting Major Health Insurers

The U.S. Centers for Medicare & Medicaid Services (CMS) announced an expansion of its annual auditing process for Medicare Advantage contracts. CMS plans to audit all eligible contracts yearly and allocate additional resources to complete auditing payment years 2018 through 2024 by early 2026. These audits focus on risk adjustment data validation to ensure that diagnoses used for payment are supported by medical records.

Following this announcement, shares of major health insurers including UnitedHealth, CVS, and Humana declined between 2.5% and 4.9% in premarket trading. The managed care industry, already facing multiple challenges, now anticipates potential claw backs of overpayments and margin pressures due to this increased regulatory scrutiny. CMS is currently behind schedule in completing previous audits, which adds to the uncertainty in the sector.

Market analysts highlight that this regulatory move may lead to financial adjustments for insurers, affecting their Medicare Advantage business profitability. The move underscores the increasing regulatory and compliance focus on Medicare Advantage plans, impacting payer strategies and risk management in the health insurance market.