Shares of major health insurers, including Humana (NYSE:
), Universal American Corp. (NYSE:
), UnitedHealth Group (NYSE:
) and Aetna (NYSE:
) rose sharply in after-hours trading Monday, following news of a
reimbursement rate reversal by the Centers for Medicare &
Shares of Humana rose eight percent, UnitedHealth Group was up
four percent, Universal American Corp. shares jumped more than
seven percent, and Aetna Inc. rose 2.6 percent.
The impetus for this after hours rally, according to
, was an announcement by CMS that it will increase Medicare
Advantage reimbursement rates 3.3 percent in 2014. In February,
the CMS had said it would decrease rates by 2.3 percent.
The proposed decrease was due to efforts by the Obama
administration to reduce how much money it pays private
Monday's reversal follows weeks of intense lobbying of the
government from both the health insurance industry and members of
Some insurers even hinted they would discontinue their
Medicare Advantage plans for 2014 if the government continued to
insist on the reimbursement decrease.
In March, a bipartisan group of senators expressed concerns
about insurers dropping out of the Medicare Advantage market and
"The Coalition for Medicare Choice" launched a media attack
against the cuts through television and social media.
In announcing its change of heart, CMS said the decision came
"after careful consideration of public comments."
BMO Capital Markets analyst Jennifer Lynch, in a note to
clients said, "We believe this final rate notice provides
insurers with enough flexibility to produce adequate margins for
The Associated Press
, Sheryl Skolnick, an analyst for CRT Capital Group said, "That's
a huge positive for the industry," referring to the new
Insurers who offer Medicare Advantage plans receive about
$10,000 per member to provide customers with basic Medicare
coverage plus vision or dental coverage, or reduced premiums.
There are literally hundreds of different Medicare Advantage
plans around the country, and TV airwaves are flooded with
advertising each fall during the annual open enrollment
Despite the reimbursement rate reversal, many Medicare
Advantage plans will still see a reduction next year due to
several other variables such as a premium tax that is part of the
health care overhaul. Even without the tax, analysts expect lower
insurer profits due to the growing cost of medical care.
However, President of Avalere Health Dan Mendelson believes
CMS has effectively stabilized the Medicare Advantage program.
"Most beneficiaries will not see dramatic changes going forward
into next year," Mendelson said.
(c) 2013 Benzinga.com. Benzinga does not provide investment
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