IPAB News Positive for MCOs - Leerink (AET) (ANTM) (CI) (HUM)

Managed Care companies are lower today as Senate Democrats urged the DoJ to block health insurance mergers. However, there was also some positive news - Independent Payment Advisory Board (IPAB) was not triggered.

Leerink analyst Ana Gupte views the news as positive for MCOs:

"This provides a relief to the investors as there were growing concerns that IPAB is likely to be triggered this year resulting in measures to curb Medicare spending growth. The IPAB is “triggered” when the actual Medicare growth rate exceeds a target growth rate set by the CMS actuary. The Medicare Trustees report states that “As in prior years, the 2016 determination is that the target growth rate has not been exceeded.” Even if IPAB is triggered in future years, we see the downside risk for MA and Part D plans as manageable given it is one line item in a broader more comprehensive rate notice for MA and Part D plans. The Medicare Trustees report also highlighted the continued strength of Medicare program given per-enrollee Medicare beneficiary cost and spending growth continues to be low. The report did highlight growth in the costs of prescription drugs paid by Medicare through its Part D program, specifically for specialty drugs as an area of spending growth. We see this as positive for MCOs and particularly for HUM (OP) that has high MA exposure as it removes an overhang on uncertainty around Medicare rates for 2018."

Related stocks:

Aetna (NYSE: AET)
Anthem (NYSE: ANTM)
Cigna Corp. (NYSE: CI)
Humana (NYSE: HUM)

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