Reuters: Global Markets: Humana shares fall after U.S. government proposes new 2014 rates

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Humana shares fall after U.S. government proposes new 2014 rates Feb 19th 2013, 15:11 Tue Feb 19, 2013 10:11am EST (Reuters) - Health insurer Humana Inc (HUM.N) said on Tuesday that the government's proposed 2014 payment rates for Medicare Advantage participants were too low and would hurt its profit outlook, sending its shares down 10 percent. Medicare Advantage is the Medicare program in which private insurers provide health insurance to seniors and are reimbursed by the government. Humana has some 2 million members enrolled in Medicare Advantage programs. Shares of UnitedHealth Group Inc (UNH.N), the nation's largest insurer that also has a sizeable Medicare Advantage business, fell 6 percent. The government's Centers for Medicare and Medicaid Services announced the proposed lower rates for Medicare Advantage on Friday. The preliminary base payments rates for Medicare Advantage implied a mid-single-digit decline in those rates for the company, Humana said. "Humana is closely analyzing all operational avenues available to address those preliminary rates and the related impact upon the company's ability to grow both its Medicare membership and its earnings for 2014," Humana said in a regulatory filing. Humana has said it expects 2013 earnings of $7.60 to $7.80 per share. Analysts expect 2014 earnings of $8.46 per share, according to Thomson Reuters I/B/E/S. HEALTHCARE REFORM Changes in Medicare Advantage rates are part of President Barack Obama's healthcare overhaul, including the Affordable Care Act that was passed in 2010. The government said in its announcement that Medicare Advantage rates have fallen 10 percent since the law was passed and that enrollment is up 28 percent. Changes are now subject to a comment period and the final figures will be published on April 1, CMS said. The government also proposed new deductibles for Medicare prescription plans. The rate cuts and rule changes appear to represent an 8 percent reduction in total for 2014 payments as compared with 2013, or potentially worse, CRT Capital Group analyst Sheryl Skolnick said in a research note. Should the rules become final, Skolnick said she would expect UnitedHealth to exit many Medicare Advantage markets and experience a significant or severe contraction in that business. But she said that as with past rule changes, expected lobbying over the next few weeks by insurers may affect the final rule. Humana shares fell about 10 percent to $69.77 in early New York Stock exchange trading. Shares in UnitedHealth Group Inc, another large provider of Medicare Advantage plans, were down about 6 percent at $54.11, from $57.32 on Friday. UnitedHealth was not immediately available to comment. (Reporting By Caroline Humer; Editing by Maureen Bavdek) Link this Share this Digg this Email Reprints

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