UPDATE: HHS Cites Medicare Advantage Enrollment Growth

Enrollment in Medicare Advantage plans has grown about 10% over the last year, according to new government data released Wednesday, highlighting why health insurers are clamoring to boost their presence in the market for senior-focused plans.

At the same time, the U.S. Department of Health and Human Services reported that premiums for Medicare Advantage plans have fallen by 7% on average since this time last year. Medicare Advantage offerings are private insurers' versions of the traditional government health plan. Shares rose across the sector Wednesday on signs of strong enrollment growth.

The health agency touted the results as evidence the U.S. health-care overhaul law has strengthened these plans. But the health insurers' industry group warned Medicare Advantage will suffer enrollment declines in coming years as program cutbacks under the health law swing into effect.

For now, at least, managed-care firms are broadly trying to increase their Medicare Advantage exposure. Both UnitedHealth Group Inc. (UNH) and Humana Inc. (HUM)--already the industry heavyweights when it comes to Medicare plans--struck deals last year that increase their heft.

Cigna Corp. (CI), traditionally focused more on the commercial market, closed this week on its $3.8 billion purchase of Medicare carrier HealthSpring. Executives at Aetna Inc. (AET), following the insurer's earnings report Wednesday, touted the potential to boost Medicare Advantage enrollment by switching over Aetna commercial customers.

Barclays Capital said the enrollment growth highlighted Wednesday was stronger than expected. Goldman Sachs said it underscored a "successful 2012 selling season across health plans."

Barclays highlighted membership gains at Humana, UnitedHealth, Coventry Health Care Inc. (CVH) and Health Net Inc. (HNT). The firm noted a drop in enrollment for Universal American Corp. (UAM), however.

Among these firms, Humana shares rose 3% Wednesday to close at $91.65, while Coventry gained 4.2% to close at $31.33. The sector generally outpaced gains in the broader market.

Medicare Advantage plans, used by roughly a quarter of seniors on Medicare, have gained in popularity because they often offer medical and drug coverage while tying in extra benefits, such as gym membership. They also typically offer lower monthly premiums. Benefits and costs in some plans can change year to year, though.

The Department of Health and Human Services said enrollment in Medicare Advantage plans has risen to 12.8 million from 11.7 million a year earlier. Average premiums, meantime, have fallen to $31.54 from $33.97. HHS Secretary Kathleen Sebelius called the Medicare Advantage program "stronger than ever."

That may not last, however, according to America's Health Insurance Plans, the industry group. It issued a release citing Congressional Budget Office projections that show enrollment declines later this decade.

-By Jon Kamp, Dow Jones Newswires; 617-654-6728; jon.kamp@dowjones.com

(Ben Fox Rubin contributed to this article.)

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