* Shares of U.S. health insurers rise, Humana up 9 pct
* Funding decline of 3.5 - 4 pct vs expectations of 7 pct
* Insurers expected to lobby for fewer cuts in final rule
(Adds details on other insurers, analyst comments, stock
By Caroline Humer
Feb 24 U.S. health insurers including Humana Inc
said on Monday that the government's proposed cuts to
privately run Medicare programs appear to represent a funding
decline of around 4 percent, less than the possible cuts of 7
percent or deeper that analysts had been expecting.
Shares of most insurers rose on Monday, with Humana leading
the pack, up 9.2 percent at $112.29 on the New York Stock
Exchange in early afternoon. Shares of UnitedHealth Group Inc
were up 2.8 percent at $75.91 and Aetna Inc was
up 2.6 percent at $72.24.
The U.S. Department of Health and Human Services late on
Friday released its proposal for 2015 Medicare Advantage
funding. The 148-page document includes details that the
companies use to calculate the government funding for the
program and to set next year's premiums.
Analysts and some companies said on Friday their first look
indicated that the cuts would be worse than the 7 percent
expected by the industry, and would require deeper reductions in
benefits for the program's elderly beneficiaries. Shares of
insurers fell in after-hours trading on Friday.
Republican lawmakers said the proposed funding was too low
and would hurt the elderly and disabled, adding to the party's
criticism of President Barack Obama's healthcare reform law. The
Patient Protection and Affordable Care Act requires some cuts in
Medicare funding and also introduces new taxes and fees.
More than 15 million of nearly 50 million Americans eligible
for Medicare are enrolled in Medicare Advantage plans, which are
managed by private insurers.
Insurer shares were higher on Monday as the view changed to
a "less-worse" outcome, according to CRT Capital's Sheryl
Skolnick. Insurers will likely lobby for less of a cut, but even
if they fail to get it, she said, "it's not the disaster people
thought it could be."
Humana said in a regulatory filing on Monday that its
analysis showed the proposed funding included cuts of about 3.5
percent to 4 percent. It had told investors earlier this month
that it was anticipating a cut of 6 percent to 7 percent.
The company said the funding calculation includes a positive
effect of 3.25 percent from an increasing number of younger,
healthier baby boomers in the mix of Medicare recipients.
Humana also said that its analysis excluded risk assessments
that it planned to protest and which could potentially result in
additional significant funding declines. The government is
expected to release final Medicare payment rates on April 7.
An executive at another Medicare Advantage provider said on
Monday that his company was also interpreting the proposal as a
cut of about 4 percent. When the document was released on
Friday, the company initially viewed the cut as 8 to 10 percent,
but after further analysis over the weekend it found that the
proposal actually included an unexpected increase in payments
related to the baby boom population. The executive requested
anonymity because he was not authorized to discuss the matter.
A spokeswoman for Aetna said her company was still
evaluating the rate notice, but that it believed any cuts on top
of last year's 6 percent would disrupt the Medicare Advantage
program and be harmful to seniors.
One analyst, Ana Gupte of Leerink Research, said she
believes the proposal represents a proposed cut of up to 7
percent but that industry lobbying will reduce the cut to 3.5 to
4 percent in the final rule.
(Reporting by Caroline Humer in New York; editing by Bernadette
Baum and Matthew Lewis)