Medicare Advantage Riding High As New Insurers Flock To Sell To Seniors

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Source: Kaiser Health News

Health care experts widely expected the Affordable Care Act to hobble Medicare Advantage, the government-funded private health plans that millions of seniors have chosen as an alternative to original Medicare.

To pay for expanding coverage to the uninsured, the 2010 law cut billions of dollars in federal payments to the plans. Government budget analysts predicted that would lead to a sharp drop in enrollment as insurers reduced benefits, exited states or left the business altogether.

But the dire projections proved wrong.

Since 2010, enrollment in Medicare Advantage has doubled to more than 20 million enrollees, growing from a quarter of Medicare beneficiaries to more than a third.

“The Affordable Care Act did not kill Medicare Advantage, and the program looks poised to continue to grow quite rapidly,” said Bill Frack, managing director with L.E.K. Consulting, which advises health companies.

And as beneficiaries get set to shop for plans during open enrollment — which runs from Monday through Dec. 7 — they will find a greater choice of insurers.

Fourteen new companies have begun selling Medicare Advantage plans for 2019, several more than a typical year, according to a report out Monday from the Kaiser Family Foundation. (KHN is an editorially independent part of the foundation.)

Overall, Medicare beneficiaries can choose from about 3,700 plans for 2019, or 600 more than this year, according to the federal government’s Centers for Medicare & Medicaid Services.

CMS expects Medicare Advantage enrollment to jump to nearly 23 million people in 2019, a 12 percent increase. Enrollees shopping for new plans this fall will likely find lower or no premiums and improved benefits, CMS officials say.

With about 10,000 baby boomers aging into Medicare range each day, the general view of the insurance industry, said Robert Berenson, a Medicare expert with the nonpartisan Urban Institute, “is that their future is Medicare and it’s crazy not to pursue Medicare enrollees more actively.”

Bright Health, Clover Health and Devoted Health, all for-profit companies, began offering Medicare Advantage plans for 2018 or will do so for 2019.

Mutual of Omaha, a company owned by its policyholders, is also moving into Medicare Advantage for the first time in two decades, providing plans in San Antonio and Cincinnati.

Some nonprofit hospitals are offering Medicare plans for the first time too, such as the BayCare Health system in the Tampa, Fla., area.

While Medicare beneficiaries in most counties have a choice of several plans, enrollment for years had been consolidated into several for-profit companies, primarily UnitedHealthcare, Humana and Aetna, which have accumulated just under half the national enrollment.

These insurance giants are also expanding into new markets for next year. Humana in 2019 will offer its Medicare HMO in 97 new counties in 14 states. UnitedHealthcare is moving into 130 new counties in 13 states, including for the first time Minnesota, its headquarters for the past four decades.

Extra Benefits

Seniors have long been attracted to Advantage plans because they often include benefits not available with government-run Medicare, such as vision and dental coverage. Many private plans save seniors money because their premiums, deductibles and other patient cost sharing are lower than what beneficiaries pay with original Medicare. But there is a trade-off: The private plans usually require seniors to use a restricted network of doctors and hospitals.

The federal government pays the plans to provide coverage for beneficiaries. When drafting the ACA, Democratic lawmakers targeted the Medicare Advantage plans because studies had shown that enrollees in the private plans cost the government 14 percent more than people in the original program.

Medicare plans weathered the billions in funding cuts in part by qualifying for new federal bonus payments available to those that score a “4” or better on a five-notch scale of quality and customer satisfaction.

Health plans also gained extra revenue by identifying illnesses and health risks of members that would entitle the companies to federal “risk-adjustment” payments. That has provided hundreds of billions in extra dollars to Medicare plans, though congressional analysts and federal investigators have raised concerns about insurers exaggerating how sick their members are.

study last year found that those risk adjustments could add more than $200 billion to the cost of Medicare Advantage plans in the next decade, despite no change in enrollees’ health.

For-profit Medicare Advantage insurers made a 5 percent profit margin in 2016 — twice the average of Medicare plans overall, according to the Medicare Payment Advisory Commission, which reports to Congress. That’s slightly better than the health insurance industry’s overall 4 percent margin reported by Standard & Poor’s.

Those profit margins could expand. The Trump administration boosted payments to Medicare Advantage plans by 3.4 percent for 2019, 0.45 percentage points higher than the 2018 increase.

Betsy Seals, chief consulting officer for Gorman Health Group, a Washington company that advises Medicare Advantage plans, said many health plans hesitated to enter that market or expand after President Donald Trump was elected because they weren’t sure the new administration would support the program. But such concerns were erased with the announcement on 2019 reimbursement rates.

“The administration’s support of the Medicare Advantage program is clear,” Seals said. “We have seen the downstream impact of this support with new entrants to the market — a trend we expect to see continue.”

Getting Consumers To Switch

Since the 1960s, Mutual of Omaha has sold Medicare Supplement policies — coverage to help beneficiaries in government-run Medicare pay the portion of costs that program doesn’t pick up. But the company only briefly entered the Medicare Advantage business once — in its home state of Nebraska in the 1990s.

“In the past 10 or 20 years it never seemed quite the right time,” said Amber Rinehart, a senior vice president for the insurer. “The main hindrance was around the political environment and funding for Medicare Advantage.”

Yet after watching Medicare Advantage enrollment soar and government funding increase, the insurer has decided now is the time to act. “We have seen a lot more stability of funding and the political tailwinds are there,” she said.

One challenge for the new insurers will be attracting members from existing companies since beneficiaries tend to stick with the same insurer for many years.

Vivek Garipalli, CEO of Clover Health, said his San Francisco-based company hopes to gain members by offering low-cost plans with a large choice of hospitals and doctors and allowing members to see specialists in its network without prior approval from their primary care doctor. The company is also focused on appealing to blacks and Hispanics who have been less likely to join Medicare Advantage.

“We see a lot of opportunity in markets where there are underserved populations,” Garipalli said.

Clover has received funding from Alphabet Inc., the parent company of Google. Clover sold Medicare plans in New Jersey last year and is expanding for 2019 into El Paso, Texas; Nashville, Tenn.; and Savannah, Ga.

Newton, Mass.-based Devoted Health is moving into Medicare Advantage with plans in South Florida and Central Florida. Minneapolis-based BrightHealth is expanding into several new markets including Phoenix, Nashville, Cincinnati and New York City.

BayCare, based in Clearwater, Fla., is offering a Medicare plan for the first time in 2019.

“We think there is enough market share to be had and we are not afraid to compete,” said Jim Beermann, vice president of insurance strategy for BayCare.

Hospitals are attracted to the Medicare business because it gives them access to more of premium dollars directed to health costs, said Frack of L.E.K. Consulting. “You control more of your destiny,” he added.

DOJ Approves $69B CVS-Aetna Merger with Part D Divestiture

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Source: Fierce Healthcare

The Department of Justice (DOJ) approved a $69 billion CVS-Aetna merger on Wednesday after Aetna agreed to sell off its Part D business.

The Part D divestiture was a condition of the merger’s approval, according to the DOJ. Late last month, Aetna agreed to sell its 2.2 million Part D business to WellCare.

Antitrust regulators said the divestiture would “fully resolve the Department’s competitive concerns.” The DOJ along with attorneys general in five states filed a proposed settlement that approves the deal on the condition that Aetna sell off its Part D plans.

“Today’s settlement resolves competition concerns posed by this transaction and preserves competition in the sale of Medicare Part D prescription drug plans for individuals,” Assistant Attorney General Makan Delrahim of the Justice Department’s Antitrust Division said in a statement. “The divestitures required here allow for the creation of an integrated pharmacy and health benefits company that has the potential to generate benefits by improving the quality and lowering the costs of the healthcare services that American consumers can obtain.”

In a complaint filed to U.S. District Court for the District of Columbia, DOJ attorneys argued that without the divestiture, the combined company would cause “anticompetitive effects, including increased prices, inferior customer service, and decreased innovation” in the 22 states where Aetna sells Part D plans. The court must approve the settlement in order for it to move forward.

“DOJ clearance is an important step toward bringing together the strengths and capabilities of our two companies to improve the consumer healthcare experience,” CVS Health President and Chief Executive Officer Larry J. Merlo said in a statement. “We are pleased to have reached an agreement with the DOJ that maintains the strategic benefits and value creation potential of our combination with Aetna. We are now working to complete the remaining state reviews.”

Part D consolidation was the primary issue raised among groups opposing the merger, including the American Medical Association and the California Insurance Commissioner.

Congress takes up retirement disclosure proposal

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Congress has begun work on the Lifetime Income Disclosure Act, a bipartisan measure that requires workplace retirement plans to give participants estimates of what retirement income their account balances would produce through an annuity.

PlanSponsor.com (4/7)

Commentary: Critical-illness insurance can protect savings

A critical-illness insurance policy can help “bridge the gap” in health coverage, writes Rod Rishel of AIG Consumer Insurance. Such policies offer a lump-sum payment that can help guard retirement savings and also provide continuity for small businesses, Rishel writes.

ThinkAdvisor (free registration) (3/28)

Insurance Sector Deal Making Shifting Into High Gear

Expect 2017 to be a year of deal making in the insurance industry, according to a report by KPMG International, with 84 percent of insurance companies surveyed planning to make between one and three acquisitions in 2017, while 94 percent plan at least one divestiture.  Two-thirds of insurers said they expect to undertake a cross-border acquisition this year.

According to the report, “The New deal: Driving Insurance Transformation With Strategy-Aligned M&A,” 33 percent of insurers say transforming their business model will be the primary driver of acquisitions in 2017, with an equal percentage citing enhancing their existing operating model and transforming their operating model as the motivators for deal activity.

“Insurers are clearly hungry for good M&A opportunities,” said Ram Menon, global lead partner at the Insurance Deal Advisory with KPMG in the United States. “They are focused on transforming their business and operating models, and even with geopolitical uncertainties, they are aggressively looking at deals that can help meet their objectives.”

Study explores link between financial, physical wellness participation

Researchers report in Psychological Science that employees who contribute to a 401(k) are more likely to see improvements in blood test abnormalities and embrace healthy behaviors than those who do not contribute to retirement accounts. The findings suggest attitudes about the future and whether they have the power to change it may play a role in retirement plan participation as well as engagement in wellness programs.

BenefitsPro.com (3/19)

Commentary: Long-term care needs to be part of health care overhaul

Any effort to reform and replace the Affordable Care Act should include provisions to address long-term care, write Everette James, Walid Gellad and Meredith Hughes of the University of Pittsburgh. Efforts to enhance long-term care should include strategies that bolster the LTC insurance market and changes to how Medicaid and Medicare cover LTC, according to James, Gellad and Hughes.

Health Affairs Blog (3/16)

Study: Part D has steadily cut elderly mortality rate

The mortality rate among elderly people has decreased by 2.2% each year since 2006 due in part to Medicare prescription drug coverage, researchers at the University of Illinois at Urbana-Champaign reported in the Journal of Health Economics.

United Press International (3/9)

Survey finds retirement worries

Eight out of 10 Americans don’t know how much cash they’ll need for a comfortable retirement, and just 27% of those 50 or older feel financially ready to pay for a decade of retirement, according to research firm Age Wave. The survey found that 75% of respondents would consider buying an “annuity-type” product with a lifetime income guarantee to be certain of a financially secure retirement, and 79% would be willing to work with a financial adviser to improve their retirement outlook.

Investor’s Business Daily (3/6)

Anthem Blue Cross Foundation Tallied $3.8 Million for 2016

From teaching lifesaving skills, to increasing cancer screening and helping youth discover that eating healthy and staying active can be fun, the Anthem Blue Cross Foundation continues to tackle some of California’s most complex health issues.

Last year’s results, donations of $3.8 million, plus hours of employee volunteer work, illustrate how the foundation’s partner non-profits are helping to reduce health disparities and empower local community residents to take control of their health.

“We know that when our communities are healthy, their residents are able to thrive, grow and prosper,” said Brian Ternan, president of Anthem Blue Cross. “The Anthem Blue Cross Foundation is proud to team with these organizations that are dedicated to improving the health of our communities and are working to change the lives of so many people across the state.”

Through its focus on heart health, cancer prevention, prenatal care, diabetes prevention, active lifestyles and behavioral health, the Anthem Blue Cross Foundation teams with organizations that are setting the standard when it comes to innovative programs that offer long term solutions.

The foundation works with the American Heart Association, The American Cancer Society and the Boys & Girls Clubs of America, among other partners.

Beyond the impact made by the Anthem Blue Cross Foundation, Anthem Blue Cross associates donated more than 7,100 volunteer hours to benefit countless nonprofits in communities across the state. Additionally, during the year-round associate giving program supported by an Anthem Blue Cross Foundation match, they raised $568,000.

Last Updated 12/05/2018

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