WASHINGTON (Reuters) - U.S. health regulators on Monday called for flat government payments next year to private insurers offering Medicare health coverage to the elderly, in line with recently passed health care legislation.

So-called Medicare Advantage plans would see the same payment rates they saw in 2010, instead of a previously proposed increase of more than 1 percent, according to the Centers for Medicare and Medicaid Services (CMS).

The law requires payments to Medicare Advantage plans to remain steady in 2011 and for reductions to begin in 2012.

The move affects health insurers such as UnitedHealth Group Inc and Humana Inc, two of the largest Medicare Advantage providers, as well as HealthSpring Inc, Coventry Health Care and Universal American Corp, among others.

Before the health care reform bill passed, CMS had proposed a net 1.28 percent hike in February.

Several analysts had anticipated a flat or negative final rate as CMS officials factored in the new healthcare law, and shares of UnitedHealth, Humana and other providers were largely unchanged in after-hours trading following the CMS announcement.

Ipsita Smolinski, a Washington-based analyst for Capitol Street, said the flat update was as expected and that CMS's rates held "no surprises" for next year.

"That just means that 2012

and beyond will be not pretty, but we already knew that from the legislation," she told Reuters.

Medicare Advantage plans offer Americans age 65 and older an alternative to traditional, fee-for-service Medicare run by the federal government. Such plans tend to offer extras such as prescription drug coverage and coverage for vision or dental services.

The government also reimburses insurers that provide those plans at a higher rate, making it a target for cost cutting and potentially a less attractive business for insurers.

Health insurers have said the cuts called for under the bill signed into law last month go too far and could force seniors who opt for the plans to pay more out-of-pocket costs or see fewer benefits.

Under the bill, Medicare Advantage plans also must spend at least 85 cents of every dollar on actual medical care or face penalties. Additionally, those that earn high marks for quality would be eligible for bonuses.

Medicare Advantage has been a growing business for the industry as high unemployment dents enrollees in health insurance plans offered by employers.

Roughly 23 percent of the 45 million people enrolled in Medicare, or about 10.2 million, opt for the private alternatives, according to the Kaiser Family Foundation.

(Reporting by Susan Heavey; Editing by David Gregorio)