https://mailchi.mp/79ecc69aca80/the-weekly-gist-december-15-2023?e=d1e747d2d8

Published last week in the Wall Street Journal, this piece predicts that the era of immense profitability for Medicare Advantage (MA) insurers may be drawing to a close.

MA has experienced rapid growth over the past decade, due both to the pace of Baby Boomers aging into Medicare, and the increasing numbers of beneficiaries choosing MA plans. In 2023, MA surpassed 50 percent of total Medicare enrollment.

Payers readily embraced the MA market because they found they could earn gross margins two to three times higher than from a commercial life.

However, as the rate of enrollment growth begins to slow (the last of the Boomers will turn 65 in 2030), competition between payers increases, and government payments become less generous, the MA business—while still profitable—is poised to become less of a jackpot. 

The Gist: While MA has been an outsized driver of profits for insurance companies in recent years, the nation’s two largest MA payers, UnitedHealth Group (UHG) and Humana, have been signaling growing concerns to the market. 

UHG announced late last month that its 2024 MA enrollment growth will be less than half of its 2023 rate, and Humana has been engaged in merger talks with Cigna. 

As the “gold rush” period ends, MA payers will have to earn their keep by better integrating their various care and data assets, and more carefully managing spending for an aging cohort of seniors with increasingly complex needs, both much harder than riding a demographic wave to easy profits.