(Bloomberg) — WellCare Health Plans Inc. (NYSE:WCG) jumped as much as 12 percent on Monday after the government proposed raising payments next year for private insurers that provide Medicare coverage.
The U.S. Centers for Medicare and Medicaid Services (CMS) on Friday proposed increasing the rates to private plans by 1.35 percent next year. That rate is subject to negotiation, and will be finalized by April. Thirteen percent of WellCare’s total enrollment comes from the program, the most after Humana Inc., Bloomberg Intelligence analysts Jason McGorman and Ian Person said in a report.
WellCare shares rose 9.1 percent to $89.82, after earlier rising to $92.24, the highest intraday price since October. Gary Taylor, an analyst with JPMorgan Chase & Co. (NYSE:JPC), on Monday upgraded his rating on the stock to overweight, and increased the price target to $114 from $80.
Medicare is the U.S. government-run program that provides health insurance for the elderly and disabled. About a third of all Medicare users get their coverage through Medicare Advantage, according to the government, which restricts doctor networks in order to provide enrollees in the program with lower out-of-pocket costs. Critics of Medicare Advantage, who argued for $206 billion in cuts to the program in order to help finance the Patient Protection and Affordable Care Act (PPACA), have said that the plans are more expensive per person than traditional Medicare.
Last year, the government initially proposed a 0.9 percent cut to the 2016 rate, but eventually reversed course and gave a 1.25 percent increase.
Not all health insurers will benefit equally. Humana, which is being bought by Aetna Inc. (NYSE:AET), estimated that the rates it receives from the government next year will rise by 0.2 percent, according to a company filing Monday.