Sector Wrap: Health insurance stocks mostly climb
INDIANAPOLIS_Several health insurance stocks outperformed the broader market in trading Tuesday, a day after the federal government released Medicare Advantage rate data that points to a payment drop next year.
One insurer saw its shares rise more than 5 percent, and four others also saw gains in afternoon trading. Meanwhile, the Standard & Poor's 500 index fell more than 2 percent.
The Centers for Medicare & Medicaid Services released after the markets closed on Monday Medicare Advantage rate information for 2010. Insurance stocks dove in February after CMS released preliminary information.
But the government released on Monday final numbers that were "slightly more positive" than the initial information, Wachovia analyst Matt Perry said in a research note.
Still, he expects Medicare Advantage rates to fall 4 percent next year.
"Medicare remains viable, but at a lower margin in 2010," Perry wrote.
Medicare Advantage plans allow the elderly and disabled to receive benefits through private health insurers. They receive a government subsidy and generally offer more benefits than traditional Medicare. More than 10 million people are enrolled in them.
Payment rates for these plans vary by county and patient health, among many other factors.
BMO Capital Markets analyst Dave Shove said Tuesday's gains may reflect relief that Monday's rate information wasn't worse.
"I think it's just a relief thing," he said. "To have a whole group strong in a weak market makes it seem like more than just randomness."
Louisville, Ky.-based Humana Inc. has a sizable Medicare Advantage business, and its shares rose 4 percent, or $1.07, to $27.38. So does Minnetonka, Minn.-based UnitedHealth Group Inc., which saw its stock rise nearly 6 percent, or $1.25, to $23.18.
Other insurers with big Medicare Advantage businesses include Nashville, Tenn.-based HealthSpring
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