Humana CEO: No regret on Medicare letter

Mike McCallister, Humana's President and CEO, speaks at the Reuters Health Summit in New York, November 11, 2009.

NEW YORK (Reuters) - Humana Inc (HUM.N) does not regret sending its Medicare customers a letter warning they could lose benefits under healthcare reform proposals circulating in Congress, the company's chief executive told Reuters on Wednesday.

The mailing prompted U.S. officials in September to probe whether Humana violated federal regulations with the letter to customers enrolled in the company's Medicare Advantage plans, a private alternative to traditional government-run Medicare coverage for the elderly and disabled.

Humana Chief Executive Mike McCallister, speaking at the Reuters Health Summit in New York, said it was important to inform seniors about proposals that could affect Medicare and he had "no regrets" about sending the letter.

"I've been accused of scaring seniors. I would argue ... I just gave them the facts, and the facts happen to be quite scary," McCallister said.

"Believe me, we knew exactly what we were doing. We were acting within the regulatory environment we operate in," he added.

Humana's letter was sent in an envelope citing important plan information, according to the Centers for Medicare & Medicaid Services. The letter told customers that bills from congressional Democrats could hurt "millions of seniors and disabled individuals (who) could lose many of the important benefits and services that make Medicare Advantage health plans so valuable," CMS said in a letter to Humana informing the company of the probe.

The Advantage plans aim to offer more benefits than traditional fee-for-service Medicare but also can cost more.

Lawmakers are weighing cuts to government Medicare Advantage payments to companies as part of an effort to help fund wider insurance coverage. Insurers say they will be forced to raise costs and reduce benefits for people in the plans.

McCallister said it was "frustrating to hear people in Washington talk about how we're going to take nearly $500 billion out of Medicare and somehow it's not going to affect seniors. I can tell you they don't believe that. It just doesn't pass the smell test."

CMS has said it was concerned Humana's letter may be misleading and could violate federal regulations. The agency ordered the company to halt related outreach until the investigation was completed.

A CMS spokesman could not immediately be reached for comment on Wednesday. The federal government was closed for the Veterans Day holiday.

Humana is cooperating with CMS, the company said when the probe into the letter was disclosed.

A health industry lobbying group and Republican lawmakers have accused CMS of issuing a "gag order" against companies and said seniors have a right to know how healthcare legislation may affect their coverage.

Humana has one of the biggest Medicare Advantage businesses among private health insurers. The company reported 1.5 million enrollees in its Medicare Advantage plans as of June 30.

Shares of Humana fell 0.2 percent to $41.71 on the New York Stock Exchange.

(Reporting by Lisa Richwine; Editing by Matthew Lewis, Phil Berlowitz)