How insurers flipped a Medicare pay cut into a pay raise

Monday afternoon was a really great time to be a health insurance plan. Right before 4 p.m., the industry's stocks all skyrocketed upward. Humana, Aetna, Cigna, UnitedHealth—the companies represented in chart above—all saw big increases. They did so with good reason: the Obama administration reversed a proposed 2.3 percent pay cut for private Medicare plans, replacing it with a 3.3 percent raise. For health plans, this was a huge victory. As Citi analyst Carl McDonald put it in a Tuesday note to investors, this was "Armageddon averted." "The rate adjustment," McDonald continues, "sends a pretty clear message that CMS has no interest in seeing major disruption in the Medicare Advantage program right now, quieting concerns about a post election desire to rein in enrollment and margins."