By Caroline Humer
Feb 19 (Reuters) - Health insurer Humana Inc said on
Tuesday that the government's proposed 2014 payment rates for
Medicare Advantage participants were too low and would hurt its
profit outlook, sending its shares down 10 percent.
Medicare Advantage is the Medicare program in which private
insurers provide health insurance to seniors and are reimbursed
by the government. Humana has some 2 million members enrolled in
Medicare Advantage programs.
Shares of UnitedHealth Group Inc, the nation's
largest insurer that also has a sizeable Medicare Advantage
business, fell 6 percent.
The government's Centers for Medicare and Medicaid Services
announced the proposed lower rates for Medicare Advantage on
The preliminary base payments rates for Medicare Advantage
implied a mid-single-digit decline in those rates for the
company, Humana said.
"Humana is closely analyzing all operational avenues
available to address those preliminary rates and the related
impact upon the company'™s ability to grow both its Medicare
membership and its earnings for 2014," Humana said in a
Humana has said it expects 2013 earnings of $7.60 to $7.80
per share. Analysts expect 2014 earnings of $8.46 per share,
according to Thomson Reuters I/B/E/S.
Changes in Medicare Advantage rates are part of President
Barack Obama's healthcare overhaul, including the Affordable
Care Act that was passed in 2010. The government said in its
announcement that Medicare Advantage rates have fallen 10
percent since the law was passed and that enrollment is up 28
Changes are now subject to a comment period and the final
figures will be published on April 1, CMS said. The government
also proposed new deductibles for Medicare prescription plans.
The rate cuts and rule changes appear to represent an 8
percent reduction in total for 2014 payments as compared with
2013, or potentially worse, CRT Capital Group analyst Sheryl
Skolnick said in a research note.
Should the rules become final, Skolnick said she would
expect UnitedHealth to exit many Medicare Advantage markets and
experience a significant or severe contraction in that business.
But she said that as with past rule changes, expected lobbying
over the next few weeks by insurers may affect the final rule.
Humana shares fell about 10 percent to $69.77 in early New
York Stock exchange trading. Shares in UnitedHealth Group Inc,
another large provider of Medicare Advantage plans, were down
about 6 percent at $54.11, from $57.32 on Friday.
UnitedHealth was not immediately available to comment.
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