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Humana says started internal review after private medicare leak

(Reuters) - Health insurer Humana Inc said on Thursday that it has begun an internal review of the events around an announcement on April 1 of a government policy change related to private Medicare.

News of the government's change in how it would reimburse insurers leaked into the market that day ahead of the announcement and Humana's shares rose sharply.

Humana spokesman Ton Noland confirmed that the company has started the probe and fired the law firm of the lobbyist who was working for Humana and who had been named by the Wall Street Journal as having been involved in the leak.

Republican Senator Charles Grassley of Iowa said after the Journal report that he had began looking into the circumstances of the announcement and that he believed the policy decision may have been leaked.

On April 1, the government was due to announce after the stock market closed details of how much it would pay insurers who provide private Medicare plans for the elderly, called Medicare Advantage. But about 20 minutes before the market closed, the investment research firm Height Securities sent out an alert saying that the government had decided to go with a more favorable payment plan, according to the Wall Street Journal.

The government then announced after the market closed that it would raise the reimbursement rate instead of cutting it by 2.3 percent, as it had initially proposed in February.

Insurers are reimbursed for Medicare Advantage, private insurance for seniors and the disabled by the government. This type of insurance accounts for about two-thirds of Humana's annual revenues. Insurers had lobbied loudly against the proposed cut, saying it would cost the industry $11 billion.

The Journal reported that a lobbyist who worked for both law firm Greenberg Traurig and Humana had been involved in the leak. Greenberg Traurig and Height Securities were not immediately available for comment.

The Centers for Medicare & Medicaid Services, which set the policy, said on April 9 that it was investigating the events around the decision. Shares of Humana, UnitedHealth Group Inc and Aetna Inc all soared on the news.

Humana did not have advance knowledge of the CMS decision on the rates, Noland said. News of the internal investigation was first reported in the Wall Street Journal on Thursday.

(Additional reporting by Sharon Begley, reporting by Caroline Humer; Editing by Bernard Orr)

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