Healthcare Business News

Insurers see proposed Medicare Advantage rates hitting revenue

By Beth Kutscher
Posted: February 19, 2013 - 6:45 pm ET

Health insurance companies are expecting reduced Medicare Advantage payments to unfavorably impact revenue next year.

The CMS on Friday released its proposed 2014 rates for Medicare Advantage plans, prompting negative reaction from payers and investors. Shares of health insurance plans such as Humana, Universal American Corp. and Health Net took a dive on the news when they opened for trading this morning.

The CMS proposal calls for a 2.2% decline in Medicare Advantage benchmark payment rates.

Humana, which derives most of its revenue from Medicare Advantage, saw one of the largest decreases in its share price. The Louisville, Ky.-based insurer said in a stock exchange filing that it is now anticipating a “mid-single-digit decline” in its benchmark payment rates, after previously stating in its most recent earnings call that it expected rates to be “flat to slightly down.”

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“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,” the payer said in the filing.

The company ended the day trading down more than 6% while Universal American lost 4.5%. Other insurance giants such UnitedHealth Group, Health Net and Cigna Corp. traded down between 1% and 2%.

America's Health Insurance Plans, the industry's trade group, called the rate change a “crushing blow” to Medicare beneficiaries that will result in “higher out-of-pocket costs, reduced benefits and fewer healthcare choices.”

“These cuts will compound the $200 billion in Medicare Advantage cuts and the new health insurance tax included in the healthcare reform law,” said Karen Ignagni, the group's president and CEO, in a statement. “The cumulative impact of these changes will reduce Medicare Advantage payments next year by more than 8%, or approximately $11 billion, destabilizing the program and putting at risk the healthcare coverage upon which millions of beneficiaries rely.”

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