Healthcare Business Trends

MA Plan Options Surge as Premiums Fall

October 2, 2018 9:33 am

MA plans were bolstered by a major legal victory earlier this month.

Oct. 1—The number of available Medicare Advantage (MA) plans will increase by 19 percent in 2019, while average premiums will decline by 6 percent, according to new federal data.

The total number of MA plans will increase from 3,100 to about 3,700, and more than 91 percent of people with Medicare will have access to 10 or more MA plans, compared to nearly 86 percent who had such access in 2018, according to a fact sheet.

Average monthly MA premiums will continue their downward trend, decreasing from $32.91 in 2015 to $28 in 2019, according to estimates from the Centers for Medicare & Medicaid Services (CMS). The average number of MA plans per county will increase by five to reach about 34.

Meanwhile, MA enrollment is projected to reach an all-time-high of 22.6 million Medicare beneficiaries, increasing by 11.5 percent from 20.2 million in 2018. That increase will bring MA’s share of all Medicare beneficiaries to 36.7 percent.

“The 36 percent share is impressive,” said Richard Frank, PhD, a professor of health economics at Harvard Medical School, who has studied MA tends. “This is partly fueled by the growing number of new enrollees in the Medicare program.”

Newer Medicare enrollees typically come from private managed care plans, which helps them be more comfortable with MA plans than earlier beneficiaries were, Frank said in comments to HFMA. Additionally, he noted that the benefits package in MA plans is more complete than in traditional Medicare, and that attracts more enrollees.

About 270 MA plans are expected to offer 1.5 million enrollees newly allowed supplemental benefits, such as adult day care services and in-home and caregiver support services. Also under new CMS rules, some plans will offer reduced cost sharing and additional benefits for enrollees with certain conditions, such as diabetes and congestive heart failure.

“The steps that the Trump Administration has taken to improve and drive competition in Medicare Advantage means more savings, more benefits, and lower costs for seniors,” Seema Verma, administrator for CMS, said in a release.

Frank said it is premature to attribute the reduced premiums to competition.

“Recall that the [Affordable Care Act] reduced payments to Medicare Advantage, and the MA premiums are in part governed by Part A and B spending in local areas,” Frank said. “Those rates of growth have been relatively slow in recent years. Finally, concentration among MA insurers in local markets has continued to increase, and it now stands at what [the Department of Justice and Federal Trade Commission] would call highly concentrated.”

Average monthly premiums for basic Medicare prescription drug plans in 2019 are projected to decrease by $1.09 (3.2 percent) to an estimated $32.50 per month. That will be the second consecutive year of projected decline.

Court Victory

Industry watchers said MA plans were bolstered by a Sept. 7 ruling by the U.S. District Court for the District of Columbia, which vacated a 2014 CMS rule requiring MA plans to report and return overpayments from CMS within 60 days of identifying them.

That regulation aimed to implement a requirement of the Affordable Care Act (ACA) but left key details to regulators, such as the definition of overpayment.

The 2016 legal challenge to the rule, brought by UnitedHealthcare, particularly questioned the definitions of overpaymentand identification of overpayments.

The court’s ruling included the finding that the definition of how an overpayment would need to be identified was developed without adequate notice to MA plans.

MA plans still must report and return any overpayment within 60 days of the date on which the overpayment was identified, but now can use a reconciliation process to determine overpayments. And CMS can appeal the decision until Nov. 7, or it could promulgate a new overpayment rule.

Provider Interest

The MA plan surge followed a June survey of hospital executives that indicated many were considering launching such plans.

A survey by Lumeris found 27 percent of 90 executives at major U.S. health systems said they intended to launch a MA plan within the next four years. However, only 29 percent of those respondents planning to launch a MA plan felt confident in their organization’s ability to do so successfully.

Lumeris, a value-based care managed services operator for health systems and providers, has found partnership models between hospitals and health plans are better for most providers it works with, rather than starting their own plans. A smaller group of health systems that are well positioned in their market and unable to find payer partners can benefit from launching their own health plans, said Jeff Carroll, executive director of health plans for Lumeris.

The challenges that providers face in succeeding in MA were illustrated by a finding that among 42 health plans that were either launched or acquired by a health system, only five were profitable in 2015.

“In terms of historical results for provider-sponsored plans, the results are not generally there,” Carroll said in an interview. “We believe in this new model of partnering with a collaborative payer to bring that capability into the market.”

Such MA payer-provider models include shared governance and risk, greater alignment around clinical outcomes and provider engagement, and a long-term commitment—beyond the standard three year provider contract.

The top reason for launching a MA plan, as cited in the Lumeris survey, was the opportunity to capture more value by controlling a greater portion of the premium dollar than in fee-for-service Medicare.

Other key drivers included market and regulatory trends that support Medicare Advantage. Shrinking Medicare margins were seen as threatening the viability of hospitals and health systems as the senior population grows and becomes a larger share of providers’ patient panels.

Provider concerns related to launching MA plans included the significant financial investment required and an overall lack of expertise with health plans. Among respondents, 59 percent were likely to use outside resources to launch their plans, including a vendor partner to mitigate operational risk.

A 2017 study found that health plans integrated with provider systems may offer better enrollee experiences and higher quality of care than nonintegrated plans.

Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare


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