Humana says government cut in Medicare ratings will impact 2018

Humana shares plunged more than 7 percent Wednesday morning after the company said that it would receive less money from the federal government because the feds had lowered their quality rating of the insurer's Medicare health plans.

The health insurer also boosted its guidance for the September quarter and current year.

The company noted that the decline in membership in 4-Star rated plans does not take into account certain operational actions the company intends to take over the coming quarters to mitigate any potential negative impact of these published ratings on Star bonus revenues for 2018.

Humana has historically performed strongly in the star ratings, which are tied to government bonus payments.

For 2017, Regence's Medicare Advantage PPO and HMO plans earned 4 to 5 stars in several key areas that contributed to the overall ratings, including customer service, call center quality, medication adherence, breast cancer screening, adult BMI assessment and drug plan improvement.

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About 2.42 million shares of Humana have been traded so far today, well above the company's average trading volume of roughly 764,356 a day.

Humana is in the midst of trying to close its deal with Aetna. A federal judge is slated to begin trial proceedings on December 5 in the Justice Department's antitrust challenge to the merger.

"Clearly, CMS is doing a lot more intensive audits on the (Medicare) plans", he explained, "So it wouldn't be surprising if there are changes to certain players' ratings going forward". It said under the newly-unveiled ratings, about 20% of its Medicare Advantage enrollees would be in a four-star plan. Cigna said in the filing that it will work with CMS to review the ratings.

Cigna also disclosed this week that Herb Fritch, who oversees its Medicare business, Cigna-HealthSpring, will retire effective November 11. Humana alone accounted for almost 1 million beneficiaries in plans that lost four- and five-star ratings, according to a company.

Anna Wilde Mathews contributed to this article.

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