Humana and United Health dominate in the private Medicare plan market. Combined, the two insurers account for roughly 40 percent of enrollees.
For Humana, the rates are critical. The program represented two-thirds of the firm's revenue in 2013. In February, Humana officials calculated that the proposed rate would result in a net reimbursement reduction of 3.5 percent to 4 percent when other rate adjustments are added in, well below its prior internal estimates.
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Humana shares turned positive for the year in February, surging to new highs, following CMS' initial rate proposal. For investors, the question is whether the stock has already priced in the good news.
Analysts now expect CMS' final rate decision could be slightly less negative than the proposed cut—a net reduction of 3 percent to 5 percent—which is already less severe than last year's reduction, which saw a net reimbursement cut of more than 6 percent.
"Whether rates fall 3 percent or 4 percent doesn't have a real material impact on profitability in 2015," Citi Research analyst Carl McDonald said in a note to clients. "All the bigger rate cut means is that plans have to adjust benefits or provider networks a little more than otherwise would have been the case."
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In most cases, insurers raised premiums in 2014 to compensate for the CMS cuts. Medicare Advantage enrollees saw an average premium increase of 14 percent, or about $5 per month, according to a Kaiser Family Foundation study.
Despite predictions from the industry that seniors would lose access to the private plans due to the cuts, industry analysts calculate that overall enrollment in Medicare Advantage this year grew nearly 9 percent from 2013.