February 23, 2015 / 3:57 PM / 5 years ago

Humana says U.S. government proposal would cut funding by up to 1.75 percent

(Reuters) - Humana Inc said on Monday that the U.S. government’s proposed payments to insurers that sell Medicare Advantage health plans would mean a 1.25 percent to 1.75 percent cut for the managed care company in 2016.

That is a steeper drop than the 0.95 percent figure the government proposed for the industry on Friday, but was still within expectations, analysts said, and Humana shares rose nearly 5 percent.

Humana said its geographic and member diagnosis mix affected the impact from the government payment rates.

The U.S. Department of Health and Human Services on Friday evening proposed a cut in its funding of the Medicare Advantage health plans to older and disabled people. Analysts said insurer shares would likely rise on the move as the potential for a larger than expected cut was erased.

Indeed, shares of insurers rose in morning trading on Monday. Humana’s gains were larger because of the company’s heavy revenue emphasis in this area.

In addition, Morningstar Research analyst Vishnu Lekraj said, the company disclosed on Monday that it had higher-than-average quality ratings, which could help its Medicare Advantage plan sales.

Shares of Humana, which derives about one-third of its revenues from the Medicare Advantage program, were up 4.7 percent at $163.50.

UnitedHealth Group Inc shares rose 2.5 percent, Aetna Inc rose 1.7 percent, Cigna Corp rose 1.3 percent and Anthem Inc gained 1.6 percent. Smaller WellCare Health Plans Inc, which focuses on Medicaid and Medicare, gained 5.5 percent.

Reporting by Caroline Humer; Editing by Lisa Von Ahn

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