Course | Intermediate | Managed Care
This course discusses financial management, the central thread that interconnects the various elements of managed care. It explains various reimbursement methodologies commonly used in managed care and the underlying assumptions and risk ma...
Course | Overview | Managed Care
This course provides an overview of the state of managed care today and discusses how and why it has evolved. It also identifies major initiatives that are currently affecting managed care and will continue to do so in the future, as the U....
Course | Basic | Managed Care
This course discusses the healthcare delivery system in the U.S. and describes how various managed care models affect the quality and cost of care. It also describes the various relationships between providers and payers. Finally, it addres...
Course | Overview | Managed Care
This course provides an overview of cost-accounting strategies related to managed care payment and contract issues. It also explains some of the modeling tools that providers can use to evaluate managed care contracts. It presents a broad o...
News | Managed Care

Provider Interest in MA Plans Surges

News | Managed Care

Provider Interest in MA Plans Surges

Providers' interest in launching MA plans has been raised by recent and coming rule changes.


Feb. 27—Most plans expected to enter the Medicare Advantage (MA) market over the next two years will be provider-sponsored, according to a health plan adviser.

Medicare beneficiaries may now choose from about 3,700 plans for 2019, or 600 more than in 2018, and the Centers for Medicare & Medicaid Services (CMS) expects MA enrollment to jump to nearly 23 million people this year, a 12 percent increase.

John Gorman, founder of the Gorman Health Group, estimated that there will be 40 to 50 new MA insurers (which could each offer multiple plans) over the next two years and said “the overwhelming majority” of those will be provider-sponsored plans. Those new plans are likely to include practice-members of America’s Physician Groups and hospitals in Premier’s population health collaborative, Gorman told attendees at the Fourteenth National Value-Based Payment and Pay for Performance Summit.

Gorman’s assessment echoed the findings of a 2018 survey by Lumeris that found 27 percent of major health system executives intended to launch MA plans within the next four years. The survey also found that only 29 percent of respondents planning to launch an MA plan felt confident in their organization’s ability to do so successfully.

The interest was driven by providers’ desire to control more of the premium dollar than they can in fee-for-service (FFS) Medicare, as well as market and regulatory trends supporting MA.

Gorman’s prediction followed the demise of high-profile provider-sponsored health plans, including some in MA and the Affordable Care Act marketplaces.

This time, MA insurers may approach health systems and suggest partnership plans, in which the insurer would provide the plan expertise and the provider would focus on the patient experience, Gorman said. Humana used such an approach in launching a plan in 2019 with the Cleveland Clinic.

“That is a great way to co-op a potential provider who wants to become their own plan,” Gorman said. “I think you’re going to see that trend a lot more.”

Driving the Interest

Gorman said the surging interest in MA plans also was fueled by several recent policy changes, including the enactment of legislation banning, by 2020, Medigap plans with first-dollar coverage, which have no copays or deductibles.

“This is going to kick off one of the biggest shopping and switching events in recent memory in Medicare,” Gorman said.

The plans also have seen a surge of enrollments that is expected to continue in the coming years. Half of all new enrollees select an MA plan over FFS Medicare within their first two years of joining the program, as of last year. That could result in half of all Medicare enrollees being in an MA plan by as soon as 2023, he said.

“This generation of Medicare beneficiaries is choosing this program overwhelmingly,” Gorman said.

Other incentives included a final CMS call letter for 2019 that established an average gross revenue increase for MA plans of 3.5 to 6.4 percent (depending on star ratings and county designations), which was the biggest MA pay raise since 2003, according to Gorman.

In addition, a 1.59 percent proposed gross revenue increase for 2020 will likely end up at about 3 percent after adjustments, Gorman said.

For health systems aiming to expand their efforts to address the social determinants of health (SDOH), another attractive feature is that MA plan rules were changed in recent years to allow more such initiatives. Gorman said 270 MA plans started providing 1.5 million enrollees with those new types of supplemental benefits in 2019.

“And I think we’re going to see an explosion in those benefits in the years to come,” Gorman said.

In 2020, MA plans can offer additional evidence-based benefits that help enrollees’ health, including home modifications, home and palliative care, transportation, food security, housing, and programs to address loneliness.

However Gorman warned that some of the new benefits may be challenging to implement. For instance, it may not work to partner with ride-sharing companies to provide transportation to enrollees with limited mobility.

“A transportation benefit can be the fastest ticket to an explosion in complaints, appeals, and grievances that you have ever seen,” Gorman said. “It’s a lot harder to do this right than you think because of the trouble that happens between the bedroom and the curb.”

Types of Plans

Among the types of MA plans that are expected to surge, according to Gorman, are preferred provider organization (PPO) plans, which are the “Cadillac product for more affluent Baby Boomers.” The appeal of such plans is driven by the combination of a provider directory “the size of phone book,” an integrated drug benefit, and a lower cost than combined Medigap and Part D plans.

For instance, the number of MA PPOs offered by just one insurer, UnitedHealth Group, increased from 106 in 2014 to 227 in 2018, according to an analysis of CMS data by Nephron Research.

“This has become a mainstream product and soon to become a leading product,” Gorman said.

Such growth has contributed to competition that allowed the average Medicare beneficiary to choose from among approximately 30 plans, and sometimes as many as 40.

“So, this about as competitive as it gets,” Gorman said.

However, the level of competition has been questioned by some. A February report from the left-leaning Commonwealth Fund, which has long been critical of MA plans, found that from 2009 to 2017, more than 70 percent of MA enrollees were in markets dominated by only two or three insurers.

New opportunities have appeared for local and regional plans because of the first-time appearance of “leasable networks” in southern states, Gorman said. Those networks allow smaller insurers to pursue employer retiree MA plans that had been hamstrung by the tendency of beneficiaries to head to Sun Belt states in the winter.  

Additionally, Gorman has noted that special-needs plans (SNPs) generally are more profitable than all other types of MA plans. A March 2015 report from the Medicare Payment Advisory Commission found that SNPs overall had 8.6 percent margins, and for-profit SNPs had 11.5 percent margins.

About the Author

Rich Daly, HFMA Senior Writer/Editor,

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


Related Articles | Managed Care

News | Price Transparency

Healthcare News of Note: Noncompliance with new price transparency rules appears to be common

CMS's auditing of price transparency commpliance and Tennessee's Medicaid block grant program waiver getting approved are two topics in Healthcare News of Note. Also, HFMA revamps its “Voices in Healthcare Finance” podcast.

News | Managed Care

Healthcare News of Note: Payers push back on CMS prior-authorization rule

Healthcare News of Note for healthcare finance professionals is a roundup of articles from the past week, including why payers are pushing back on the prior-authorization rule and information on HHS funding to support the nation's response to the COVID-19 pandemic.

Fact Sheet | Technology

Prior Authorization and APIs for Medicaid, CHIP and QHPs Proposed Rule Summary

HFMA presents a detailed summary of the proposed rule published by CMS, which aims to improve the electronic exchange of health care data and streamline prior authorization by building on previously adopted requirements pertaining to Application Programming Interfaces.

News | Coronavirus

Chronic conditions, other health issues have worsened during the pandemic, physician survey finds

The health of patients, including those with chronic diseases, is worsening during the pandemic, say clinicians.