* CMS: Medicare Advantage plans to see net 1.6 pct rise
* Final rates due April 4
* Shares of Humana, UnitedHealth, HealthSpring rise
(Adds analysts' comments, share prices, byline)
By Susan Heavey
WASHINGTON, Feb 18 U.S. health insurers
offering private Medicare Advantage plans will see a net 1.6
percent increase in federal government reimbursements on
average next year, the Centers for Medicare and Medicaid
Services said on Friday.
The agency that runs the nation's health insurance plan for
the elderly and disabled said its proposal for 2012 would offer
health insurance companies "a health payment update" while also
keeping plans affordable for beneficiaries.
Analysts said CMS's resulting increase was better than
expected, and shares of several insurers that sell the plans
rose after the news. Wall Street had been bracing for rates
that were flat to 1 percent higher.
Ipsita Smolinski, a Washington-based analyst for Capitol
Street, said the 2012 rate adjustment "was better news than I
would have expected ... most people would've assumed that CMS
would have have made deeper cuts" given changes called for in
last year's healthcare law.
Medicare Advantage plans are run through private health
insurers and offered as an alternative to traditional Medicare
plans. They aim to be more efficient and offer better services
for less money, but critics charge the government pays the
plans too much.
Humana Inc (HUM.N) and UnitedHealth Group Inc (UNH.N) are
the biggest providers of Medicare Advantage plans and the most
exposed, along with HealthSpring HS.N. Other providers
include Aetna Inc (AET.N), Cigna Corp (CI.N) Coventry CVH.N,
Health Net Inc HNT.N and WellPoint Inc WLP.N.
Last year's health law calls for changes to Medicare
Advantage rates to bring them more in line with traditional
Medicare and save the government money. Analysts have said
those changes, while not likely to kill off the plans, could
lead to consolidation in the industry.
Potomac Research Group analyst Paul Heldman said Friday's
announcement signaled that the Obama administration was moving
away from targeting such private-run plans.
"It seems to me that CMS is bending over backward to make
sure that the program remains stable and that plans are paid
enough to allow them to continue to offer enough benefits to
make them attractive to beneficiaries," he said.
In a call with reporters, CMS Deputy Administrator and
Director Jonathan Blum said the average 1.6 percent increase
would vary by region and applicable bonus payments.
HealthSpring shares rose 8.5 percent after hours after
closing at $37.06. Humana shares were up 1.4 percent from their
close of $61.44 and UnitedHealth shares rose nearly 1 percent
after closing at $42.84.
CMS is accepting public comment on the proposed rates for
45 days. Its final decision is expected April 4.
(Reporting by Susan Heavey; Additional reporting by Deena
Beasley in Los Angeles; Editing by Tim Dobbyn)