Jan 26 (Reuters) - U.S. President Donald Trump's administration has proposed an average rate increase of just 0.09% in Medicare payments to insurers next year, the government said on Monday, driving shares of health insurers down more than 10%.

The Centers for Medicare & Medicaid Services said the proposal would amount to more than $700 million in additional Medicare Advantage payments in 2027.

Shares of health insurers Humana and Alignment Health down 12% in after-hours trading; CVS Health down 10%; UnitedHealth down 9%; Elevance Health down 6%; Molina Healthcare were down 3%.

The agency said the update reflects underlying cost trends, 2026 Star Ratings, and changes to the risk‑adjustment model, all aimed at improving payment accuracy and maintaining stable, affordable coverage for beneficiaries.

"These proposed payment policies are about making sure Medicare Advantage works better for the people it serves," CMS Administrator Mehmet Oz said, adding that the agency wants to modernize risk adjustment and ensure taxpayers are protected from unnecessary spending.

The proposal aims to improve payment accuracy and ensure Medicare insurers are adequately reimbursed.

Private Medicare plans, known as Medicare Advantage, are a major business for insurers, and federal rate decisions are central to their financial outlook.