Health insurers jump after Medicare Advantage 2014 rates raised

theflyonthewall.com

A number of health insurance companies are rallying after the Centers for Medicare & Medicaid Services, or CMS, last night announced that it would increase payments for Medicare Advantage services by 3.3% in 2014. CMS had previously proposed a 2.2% cut in reimbursement rates. Under the Medicare Advantage program, private companies provide health insurance to Medicare recipients. ANALYST REACTION: Several analysts responded to the news in notes to clients today by noting that insurance companies that participate in Medicare Advantage will benefit from CMS' decision. Citigroup analyst Carl McDonald wrote that CMS' decision should cause the stock multiples of these insurers to rise, as a large drop in Medicare advantage rates would have pressured their 2014 earnings. Humana (HUM), WellCare (WCG), Health Net (HNT), Universal American (UAM), and UnitedHealth (UNH) are among the companies that are most influenced by changes in Medicare Advantage rates, the analyst wrote. The analyst kept Buy ratings on Humana, Universal American, and United Health. Credit Suisse thinks that Humana is most affected by changes in Medicare Advantage rates, but it expects investors' sentiment to improve towards the entire health insurance sector. TODAY'S PRICE ACTION: In mid-morning trading, Humana climbed 8.3% to $81.25, Universal America rallied 10% to $9.55, UnitedHealth advanced 8% to $63.73, Health Net rose 4% to $30.38, and WellCare climbed 4.7% to $63.

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