By Kim Dixon

WASHINGTON (Reuters) - The U.S. Medicare program's decision to delay cutting payments for plans with patients that appear to be getting sicker faster than those in its traditional program will benefit insurers like Humana Inc (HUM.N: Quote, Profile, Research) and UnitedHealth Group Inc (UNH.N: Quote, Profile, Research).

Instead, the Centers for Medicare and Medicaid Services will conduct pilot audits of its Medicare Advantage program, that is delivered through private companies, to address diagnosis coding disparities.

"The specter of lower risk payments in a declining rate environment was an overhang to shares, in our opinion, and a key interest of sophisticated investors," Stifel Nicolaus analyst Tom Carroll said in a note to clients.

Humana's shares rose more than 5 percent to $45.67, while United Health shares gained 3.5 percent to $37.95 and HealthSpring (HS.N: Quote, Profile, Research) stock rose 8.5 percent to $16, in late Tuesday morning New York Stock Exchange trading.

The decision overshadowed the lower-than-proposed average rate increase of 3.6 percent for 2009, announced by the Centers for Medicare and Medicaid Services (CMS) on Monday. Previously, CMS proposed an increase of 4.8 percent.

In addition, HealthSpring and Humana will benefit more than most from a readjustment of rates in Miami Dade County, Florida, which will get a 13 percent rate increase.

About 20 percent of the the 44 million elderly and disabled individuals on the government's Medicare program are enrolled in the private plans, known as Medicare Advantage. A 2003 law adding a prescription drug benefit to Medicare lured insurers into the program.

Although Medicare accounts for about 20 percent of the earnings of most managed-care plans, the program drove nearly half of the rise in industry gross profit in 2007, according to Oppenheimer & Co analyst Carl McDonald.