Health Care Stocks Face Medicare Advantage Hit

However, Karen Ignagni, president and CEO of the health insurers body Americas Health Insurance Plans (AHIP) offered a different perspective when the bill passed back in July. She said, "As seniors learn the details of this hastily passed legislation, they will be shocked to learn they could face fewer choices, reduced benefits and higher out-of-pocket costs if these cuts become law." The Republican party is firmly on AHIP's side, although a call to Sen. John McCain's (R., Ariz.) campaign, seeking comment, was not returned.

If Obama is elected, it is reasonable to expect that in 2010 the private insurers offering Medicare Advantage plans would see a permanent reduction in reimbursement rates. It is not known to what extent the reduction would be, but AHIP does not support cuts and cautioned previously that there will be negative effects on the elderly.

Democrats said in July that this is nonsense and that as Medicare Advantage currently receives an excessive level of reimbursement for their services, reportedly up to 17% above Medicare rates, they would not be losing anything, just reducing their profits on the plans.

UnitedHeath Group (UNH Quote), earlier in the year announced that it was stopping marketing some Medicare Advantage special needs plans that it had been operating because of reduced earnings. UnitedHealth on Thursday reported a $920 million profit for the third quarter, down 28%. A change in the administration will put additional pressure on the company. It will be interesting to see the quarterly results for the Medicare Advantage giant Humana (HUM Quote), which is due to report Nov. 3, the eve of the presidential election.