Medi­care Ad­van­tage con­tin­ues to in­flu­ence in­sur­ers’ prof­itabil­ity

Modern Healthcare - - NEWS - By Shelby Liv­ingston

The Medi­care Ad­van­tage pro­gram helped and hurt in­sur­ers re­port­ing their sec­ond-quar­ter earn­ings last week.

Aetna and Hu­mana both re­ported that their re­spec­tive Medi­care Ad­van­tage books of busi­ness were bol­stered by growth in Medi­care Ad­van­tage mem­ber­ship.

But Aetna posted lower rev­enue in the quar­ter, thanks to ex­pected lower premi­ums and mem­ber­ship in its ACA in­di­vid­ual and small group busi­nesses.

The Hart­ford, Conn.-based in­surer grew Medi­care Ad­van­tage premi­ums due to mem­ber­ship gains in the quar­ter ended June 30. Aetna’s gov­ern­ment pro­grams con­tinue to make up more than half of the in­surer’s to­tal rev­enue. Still, Medi­care Ad­van­tage growth wasn’t enough to keep Aetna’s rev­enue from slid­ing by 2.7% to $15.5 bil­lion com­pared with the year-ago pe­riod.

Aetna has in­creas­ingly re­lied on its Medi­care prod­ucts as its pri­mary source of rev­enue. The in­surer has added 130,000 Medi­care mem­bers since the be­gin­ning of the year, bring­ing Medi­care Ad­van­tage mem­ber­ship to 1.5 mil­lion as of June 30. In June, Aetna sub­mit­ted bids to the CMS to ex­pand its reach to 60% of the Medi­care pop­u­la­tion in 2018, from 56% this year.

Mean­while, Hu­mana more than dou­bled its profit in the quar­ter as it brought in higher Medi­care Ad­van­tage rev­enue and im­proved earn­ings in its in­di­vid­ual com­mer­cial seg­ment. Af­ter its pro­posed merger with Aetna died ear­lier this year, the Louisville, Ky.-based in­surer turned its at­ten­tion to im­prov­ing and grow­ing its Medi­care Ad­van­tage busi­ness.

Hu­mana, which was hit last year with lower CMS Medi­care star ratings, said it now ex­pects 74% of its Medi­care Ad­van­tage mem­bers to be in four-star plans or higher for 2018, com­pared with 37% in 2017. The im­prove­ment should help boost rev­enue and bring in a larger star ratings bonus, an­a­lysts said.

In the three months ended June 30, Hu­mana’s Medi­care rev­enue in­creased 3.3% to $10.5 bil­lion com­pared with the year-ago pe­riod as it grew mem­ber­ship in that seg­ment by 4.5% to 8.5 mil­lion mem­bers.

The Medi­care Ad­van­tage pro­gram did not help Cigna Corp., which is still re­cov­er­ing from gov­ern­ment penal­ties as­sessed to its of­fer­ings. The in­surer lost Medi­care Ad­van­tage and Med­i­caid mem­bers, and mem­ber­ship from gov­ern­ment pro­grams slid by 18% in the sec­ond quar­ter.

The CMS slapped Cigna with sanc­tions in Jan­uary 2016, af­ter find­ing ma­jor prob­lems with the in­surer’s Medi­care Ad­van­tage plans. The sanc­tions barred the com­pany from mar­ket­ing and sell­ing its Medi­care Ad­van­tage pol- icies to new ben­e­fi­cia­ries. Cigna was also hit with lower Medi­care Ad­van­tage star ratings last Oc­to­ber fol­low­ing a CMS au­dit.

In June, the CMS lifted those sanc­tions. Cigna said Fri­day that it is ac­tively en­rolling Medi­care Ad­van­tage mem­bers again and is “well-pre­pared for a very suc­cess­ful open en­roll­ment this fall.”

The in­surer also grew its mem­ber­ship in the in­di­vid­ual in­sur­ance mar­ket by 82% to 334,000 mem­bers, in­clud­ing 244,000 on the ACA mar­ket­places. Still, Cigna said it ex­pects to record a loss on those plans for 2017, though a smaller loss than last year. Cigna sells ACA ex­change plans in seven states this year.

Molina Health­care faces big­ger prob­lems. A week af­ter Molina an­nounced it would lay off 10% of its work­force, the Med­i­caid man­aged-care in­surer re­ported a $230 mil­lion loss for the sec­ond quar­ter.

Long Beach, Calif.-based Molina told in­vestors that it will re­struc­ture the com­pany and exit mar­ket­places in Utah and Wis­con­sin to im­prove its op­er­at­ing per­for­mance and re­turn to prof­itabil­ity. Molina, which fired its CEO and chief fi­nan­cial of­fi­cer in May, said its poor fi­nan­cial re­sults were driven largely by high med­i­cal-care costs.

AP PHOTO

Aetna has added 130,000 Medi­care mem­bers since the be­gin­ning of the year, bring­ing Medi­care Ad­van­tage mem­ber­ship to 1.5 mil­lion as of June 30.

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