(Bloomberg) — Insurers such as UnitedHealth Group Inc. (NYSE:UNH) and Humana Inc. (NYSE:HUM) will see the underlying pay rate for Medicare Advantage policies rise 1.25 percent next year, reversing an earlier U.S. government proposal that called for a reduction.
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The announcement compares with a base reduction of 0.9 percent proposed in February. Last year, the government proposed a payment reduction of 4 percent for 2015 as part of the government’s plan to bring the cost of private Medicare plan coverage in line with the cost of traditional program coverage.
UnitedHealth was the top provider of Medicare Advantage plans last year, with about 3 million enrollees. Humana had 2.9 million enrollees, and Anthem Inc. (NYSE:ANTM) had 1.4 million enrollees.
The Obama administration has been pushing to contain costs for Medicare Advantage since the passage of the Patient Protection and Affordable Care Act of 2010 (PPACA). In 2010, U.S. spending for Medicare Advantage enrollees was estimated to be as much as 13 percent higher than for people enrolled in traditional Medicare. The government now spends only about 2 percent more per private plan enrollee.
America’s Health Insurance Plans (AHIP) has called on the U.S. to avoid cutting payments. The industry group has said cuts increase costs for the elderly.
The actual rate change could vary from plan to plan, because Medicare program managers adjust payments to insurers by location and based on the health of their customers.
The annual election period for 2016 is set to run from Oct. 15 through Dec. 7.
About 15.8 million people, or 30 percent of all Medicare enrollees, enrolled in a Medicare Advantage policy last year, according to the Medicare Payment Advisory Commission.
—With assistance from Alex Wayne in Washington.