(Recasts to show stock price reaction, adds details)
April 2 Shares in some of the largest U.S.
health insurers surged on Tuesday following an announcement late
Monday by the government that it would increase payment rates
for Medicare Advantage in 2014.
The Centers for Medicare & Medicaid Services announced after
the market closed on Monday that it would raise the
reimbursement rate by 3.3 percent next year instead of cutting
it by 2.3 percent, as it had proposed in February.
Humana Inc said on Tuesday that the government's
move is an improvement over earlier proposals, but it still
faces challenges in certain parts of the country.
"The news is clearly a victory for the health plans," CRT
Capital Group analyst Sheryl Skolnick said in a research note.
Other cuts and coding changes related to the Affordable Care
Act will nearly offset the increase in reimbursement, Humana
said in a statement, and it is still determining what the
negative impact will be on its Medicare insurance program.
Insurers are reimbursed for Medicare Advantage, private
insurance for seniors and the disabled by the government. This
type of insurance accounts for about two-thirds of Humana's
annual revenues. Insurers had lobbied loudly against the
proposed cut, saying it would cost the industry $11 billion.
In Tuesday morning trading, Humana shares were up 9.1
percent at $81.79, UnitedHealth was up 7.3 percent at
$63.24, Aetna was up 4.4 percent at $54.52, Cigna
was up 4.4 percent at $65.66 and WellPoint was up 3.7
percent at $69.94.
(Reporting by Caroline Humer; Editing by Alden Bentley, Chizu
Nomiyama and Nick Zieminski)