J.P Morgan: CMS Stops HealthNet's Marketing/Enrollments

CMS issued a sanction against Health Net HNT for violations, these apparently pertaining to improper administration of the Medicare drug benefit for both stand-alone Part D and MA- PD. Two other plans, UAM and Arcadian, were also sanctioned, though they can still market/enroll through 12/5 and UAM's stand-alone Part D business was not affected. HNT is required to immediately suspend marketing to and enrolling new beneficiaries in its prescription drug (Part D) and Medicare Advantage plans. Certainly sanctions aren't new, so we wouldn't exactly characterize this as all that startling of an event, with WLP, WCG and AET all having been down this road, but it can take some time to get CMS comfortable again. J.P Morgan's prior 2011E had assumed net adds in both Medicare Advantage and Part D, while now there instead will likely be some net attrition in both books. On this, notably, the company will most likely miss the entire open-enrollment shortened in 2010 and only running through December 31. J.P Morgan has a Neutral rating and $30 PT on HNT HNT closed Friday at $27.48