Medi­care Ad­van­tage is still the ‘only safe game in town’ for in­sur­ers

Modern Healthcare - - NEWS - By Shelby Liv­ingston

While Medi­care Ad­van­tage plans added nearly 900,000 mem­bers in 2016, en­roll­ment grew at a slower pace than in re­cent years. Still, experts say the fu­ture of the pro­gram will be lu­cra­tive for in­sur­ers.

“It’s the only safe game in town, in all of health in­sur­ance,” said John Gor­man, a for­mer CMS of­fi­cial who is now a health­care con­sul­tant in Wash­ing­ton.

En­roll­ment in the pri­vate, man­aged­care ver­sion of Medi­care grew 5% to nearly 18.7 mil­lion in the 12 months since Dec. 1, ac­cord­ing to the lat­est fed­eral data. By con­trast, it was up 6.8% at the end of 2015 and 9.8% in 2014.

Unit­edHealth Group, Hu­mana, Kaiser Per­ma­nente and Aetna still hold the throne for the most Medi­care Ad­van­tage plan mem­bers. En­roll­ment in Unit­edHealth’s Ad­van­tage plans grew 13.2% to just shy of 4 mil­lion mem­bers.

Hu­mana, though still No. 2 in plan mem­bers be­hind Unit­edHealth, lost nearly 40,000 plan mem­bers this year when a large group ac­count went to a pri­vate ex­change in Jan­uary.

And Cigna, which was sanc­tioned by the CMS in Jan­uary for fail­ing to com­ply with the agency’s Medi­care rules, only en­rolled about 4,000 mem­bers in 2016. Be­cause of the sanc­tions, Cigna wasn’t able to par­tic­i­pate in Medi­care’s an­nual en­roll­ment pe­riod, which ran from Oct. 15 to Dec. 7. If the Bloom­field, Conn.-based in­surer doesn’t fix the prob­lems soon, it could see its Medi­care mem­ber­ship plum­met.

Part of the slow­down of the pro­gram’s over­all en­roll­ment can be attributed to fund­ing cuts im­posed by the Af­ford­able Care Act start­ing in 2012 and phased in over the last five years. Those cuts were de­vised to help off­set the cost of the ACA ex­changes and bring Ad­van­tage pay­ment rates in line with tra­di­tional Medi­care.

In re­sponse to the cuts, plans re­duced ben­e­fits and raised pre­mi­ums, among other cost-sav­ing mea- sures, Gor­man said. Plans are likely to see a boost in pay­ments in 2018, he said. “Then you’ll see a re­turn to richer ben­e­fit de­signs with lower pre­mi­ums and out-of-pocket costs.”

Gretchen Ja­cob­son, an as­so­ci­ate di­rec­tor with the Kaiser Fam­ily Foun­da­tion’s pro­gram on Medi­care pol­icy, said there’s not enough data avail­able to know if ben­e­fit de­signs have truly got­ten leaner be­cause of the fund­ing cuts. But pre­mi­ums, she said, have been rel­a­tively flat while caps on outof-pocket costs have in­creased 25% on av­er­age since 2011.

Gor­man said he ex­pects an­nual growth in Medi­care Ad­van­tage en­roll­ment to hover be­tween 5% and 7% in the com­ing years bar­ring any ma­jor leg­isla­tive changes to the mar­ket. It will be the safest op­tion for in­sur­ers as the Trump ad­min­is­tra­tion and Repub­li­cans in Congress work on leg­is­la­tion dis­man­tling the ACA, which many ob­servers worry will cause the in­di­vid­ual in­sur­ance mar­ket to col­lapse un­less a re­place­ment plan is adopted at the same time.

And while Repub­li­cans are also sig­nal­ing they want to over­haul Medi­care, it’s un­likely they would do any­thing to un­der­mine the Ad­van­tage pro­gram. The “pre­mium sup­port” model fa­vored by House Speaker Paul Ryan would fun­nel many more ben­e­fi­cia­ries into pri­vate plans.

Ad­van­tage car­ri­ers, mean­while, are jock­ey­ing for mar­ket share through ac­qui­si­tions. Med­i­caid man­aged-care in­surer Cen­tene, which has been in­vest­ing heav­ily in its Medi­care Ad­van­tage busi­ness, saw en­roll­ment ex­plode to more than 302,000 from about 34,000 last year, largely due to its re­cent ac­qui­si­tion of Health Net.

In Novem­ber, Wel­lCare Health Plans said it would ac­quire Medi­care in­surer Univer­sal Amer­i­can Corp. for $800 mil­lion. The deal would boost Wel­lCare’s qual­ity rat­ings, which are gen­er­ally low. About 70% of Univer­sal Amer­i­can’s 114,000 Medi­care Ad­van­tage mem­bers are in plans with at least four stars.

Aetna’s Medi­care Ad­van­tage busi­ness will soar if it clinches the pend­ing ac­qui­si­tion of Hu­mana. Even after sell­ing off Ad­van­tage as­sets to Molina Health­care—which Aetna pro­posed as a way to re­solve the U.S. Jus­tice De­part­ment’s an­titrust con­cerns—the deal would prob­a­bly still put the com­bined com­pany ahead of Unit­edHealth as the big­gest Ad­van­tage car­rier.

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