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 The announcement, by a division of the U.S. Department of Health and
Human Services, comes after the U.S. government proposed a 0.95
percent cut in payments to insurers in February.
More than 16 million people are enrolled in these plans, in which
healthcare benefits are managed by private insurers, including
UnitedHealth Group Inc, Humana Inc and Aetna Inc.
Each April the government announces reimbursement rates for
insurers. The information helps insurers determine how profitable it
will be to sell these plans, which optional benefits to provide and
in which regions and markets to compete.
Shares of Humana, which receives about two-thirds of its revenue
from Medicare Advantage plans, rose about 1 percent to $180 in after
hours trading. UnitedHealth, Aetna and Anthem Inc were mostly
unchanged.
The increase comes after many years of cuts to Medicare Advantage
payments, because of an overall decline in healthcare spending and
changes under the Affordable Care Act that seek to align payments
more closely with the government-run Medicare fee-for-service
program.
The increase is larger than expected, Leerink Partners analyst Ana
Gupte said, and bodes well for insurers that sell these plans next
year.
"2016 enrollment growth should be accelerated compared to previous
years," Gupte said.
Some insurers as well as the nation's largest insurer lobbyist
group, America's Health Insurance Plans, had warned the government
that any cuts would hurt the elderly.
“The final rate notice took a notable step to provide stable funding
for the Medicare Advantage program," AHIP President Karen Ignagni
said, adding, however, that the policy did not do enough to protect
chronically ill and vulnerable populations.
The increase for 2016 versus the decline announced in February
results from expectations of Medicare Advantage spending growth of
4.2 percent, compared with the 1.7 percent the government forecast
in February.
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The 4.2 percent growth reflects additional spending in 2014 and
2015, as well as higher expected outlays in 2016. The Centers for
Medicare & Medicaid Services said higher spending was due to
hospitalizations, rural health clinics and federally qualified
health centers.
It also includes a 0.1 percent increase based on the assumption that
Congress will enact legislation raising Medicare payments to
doctors.
The government also said that it would move forward with changes to
how it pays insurers for patients who are sicker than average. It
will additionally leave the star ratings systems, which rewards
high-performing plans, as planned, and it will tighten oversight of
each plan's pharmacy network and provider networks and directories.
The government policies affect each insurer differently, said Ipsita
Smolinski, an analyst with Washington, D.C.-based research firm
Capitol Street.
"All of these numbers are averages and the bottom line 2016 impact
is going to vary by plan, by location, by star rating and by coding
practices," Smolinski said.
(Reporting by Caroline Humer; Editing by Steve Orlofsky)
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