Humana shares soar 8% following Medicare Advantage rate increase

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Last Update: 02-Apr-13 07:53 ET

Humana (HUM $81.50 +6.48) disclosed its preliminary assessment of the anticipated rate impact from the issuance by the Centers for Medicare and Medicaid Services (CMS) of the final Announcement of Calendar Year 2014 Medicare Advantage Benchmark Rates and Payment Policies (the CMS Final Announcement) which was issued by CMS after the close of market trading on Monday, April 1, 2013. Based on its review of the CMS Final Announcement, Humana expects its 2014 Medicare Advantage bid benchmark premium to include an increase for medical cost trend of ~3.4% vs. the previously expected reduction of approximately 2.2%. The co also noted that previously disclosed statutory reductions for Affordable Care Act payment cuts and risk coding intensity adjustments are anticipated to nearly offset the medical cost trend increase of 3.4%. The CMS Final Announcement adjustments for risk coding recalibration and county rebasing are anticipated to have a material negative impact upon bid premiums in certain geographies in 2014. The company is completing more detailed analyses of these additional adjustments and anticipates further discussion in its first quarter earnings call on May 1, 2013. "We are pleased that CMS has recognized the significant negative impact the rates initially proposed for 2014 were expected to have upon the millions of Medicare beneficiaries who choose Medicare Advantage plans, but we believe certain of the technical adjustments may still present meaningful challenges in certain geographies." Humana anticipates it will share 2014 operating margin, earnings and membership expectations based on its approved Medicare bid designs during the fourth quarter of 2013 after CMS makes 2014 benefit designs for the entire sector publicly available.