OUTLOOK ‘STABLE’ FOR HEALTH INSURERS IN 2019 DESPITE ACA UNCERTAINTY

https://www.healthleadersmedia.com/finance/outlook-stable-health-insurers-2019-despite-aca-uncertainty

A robust job market bolstering employer-sponsored plans, Baby Boomers transitioning to Medicare Advantage, and ACA exchanges attracting new payers are good signs for health plans in the coming year.


KEY TAKEAWAYS

Consolidations among larger payers makes it harder for smaller players to enter the market or sustain a presence.

Payment reforms around the ACA will continue to drive more cross-sector collaboration among payers and providers.

Despite the uncertainty over the future of the Affordable Care Act, the U.S. health insurance sector remains stable heading into 2019, according to a new analysis by S&P Global Ratings.

“A combination of still-favorable business conditions, financial factors, and diminished near-term legislative uncertainty balances our concerns relating to merger and acquisition activity, elevated policy risk, and re-emergent legal overhang,” said S&P analyst Joseph Marinucci.

Strong job growth is bolstering commercial markets, aging Baby Boomers are driving Medicare Advantage growth, states are shifting their high acuity populations into managed Medicaid, and the ACA exchanges are stabilizing and attracting new competitors, S&P said.

“We assess capital and liquidity as strong or better for most of our rated U.S. health insurers, which supports balance-sheet strength,” Marinucci said. “U.S. health insurers’ operating performance reflects sustained earnings strength and improved earnings quality.”

However, Marinucci said that profitability could moderate somewhat this year.

M&As remain a key rating factor, especially with larger transaction sizes, raising concerns about financial leverage, integration, and cultural compatibility. Consolidations, joint ventures, and partnering among larger insurers are defragmenting the sector, allowing the big insurers to build scale, “and create more touch points as the trend toward consumerism gains traction.”

This is making it harder for newer and smaller players to enter the market or sustain their presence,” S&P said. “As a result, we continue to see larger health insurers taking a bigger share of the marketplace, and smaller players being displaced or struggling to achieve profitable growth as the competitive gap widens.”

“Although the mid-term elections removed a good deal of legislative uncertainty for the industry, policy risk remains elevated given the administration’s preference for ACA alternatives,” S&P said.

In addition, S&P says that payment and delivery reforms mandated in the ACA around value-based care will continue to drive greater cross-sector collaboration among payers and providers.

“A COMBINATION OF STILL-FAVORABLE BUSINESS CONDITIONS, FINANCIAL FACTORS, AND DIMINISHED NEAR-TERM LEGISLATIVE UNCERTAINTY BALANCES OUR CONCERNS RELATING TO MERGER AND ACQUISITION ACTIVITY, ELEVATED POLICY RISK, AND RE-EMERGENT LEGAL OVERHANG.”

 

 

 

Why payers are flocking to the Medicare Advantage market

https://www.healthcaredive.com/news/why-payers-are-flocking-to-the-medicare-advantage-market/510589/

Medicare Advantage (MA) and the Affordable Care Act (ACA) exchanges are both federal programs, but they couldn’t be more different in payers’ eyes. Insurance companies are entering or expanding their footprints in the MA market, while simultaneously pulling back or out of the ACA exchanges. They’ve found success in MA. Not so much in the ACA exchanges.

Payers see MA as a stable market. That’s evident in the fact that MA premiums are expected to decrease by 6% next year. Insurance companies like stability. Insurers increase premiums by double digits when there isn’t stability, which is the case with the ACA exchanges.

A large part of the ACA exchanges’ problems is linked to actions and inaction in Washington, D.C. President Donald Trump’s administration stopped paying cost-sharing reduction payments to insurers, cut the exchanges’ open enrollment in half, reduced the exchanges’ advertising budget by 90%, offered proposed rules and executive orders that hurt the ACA and threatened not to enforce the individual mandate that requires almost all Americans to have health insurance.

Congress, meanwhile, has tried and failed to repeal the ACA this year. All of this created an unstable exchanges market, which resulted in payers leaving the exchanges or jacking up premiums by 20% or more for 2018.

Meanwhile, the MA market is a picture of stability and payer success.

  • There is a steady stream of new people eligible for Medicare daily, and many choose MA.
  • People usually don’t switch back from MA plans after leaving traditional Medicare.
  • Payers can easily convert members from traditional Medicare to MA via marketing campaigns.
  • The MA demographics are usually people who once had an employer-based plan, so they know insurance and how healthcare works. That also means they usually don’t have pent-up healthcare needs.
  • The CMS pays MA plans upfront for covering people with high healthcare costs and payers have enjoyed stable MA payments from the CMS.

So, MA members are easier to get and keep, they usually have fewer health needs and payers like the MA payment structure better than the exchanges, which get compensated at the end of the year. All of that equals a stable market for payers.

One-third of Medicare beneficiaries are enrolled in an MA plan this year compared to 25% just six years ago. Enrollment grew by 8% between 2016 and 2017 and the CMS recently announced that MA membership will grow by 9% to 20.4 million members in 2018.

Gretchen Jacobson, associate director with the Kaiser Family Foundation’s (KFF) Program on Medicare Policy, told Healthcare Dive that more than half of those in Medicare will have MA plans in many counties next year.

That growth isn’t expected to slow — especially with Republicans controlling both houses of Congress and the White House, according to Steve Wiggins, founder and chairman of Remedy Partners.

“With Republican control of the federal government, it is conceivable that Medicare Advantage will become a centerpiece of CMS’ strategy to control spending growth,” Wiggins told Healthcare Dive.

What more MA members and payers mean for hospitals and providers

With more MA members expected next year, the continual shift to MA will have mixed benefits for providers. Jacobson said it’s not entirely clear how more MA members will affect hospitals and providers. “One of our studies recently showed that the provider networks for Medicare Advantage plans greatly varies and these networks will become even more important as enrollment in Medicare Advantage plans grows,” she said.

Fred Bentley, vice president at Avalere Health, told Healthcare Dive that MA’s growth will present a whole new set of challenges for hospitals and health systems.

Bentley listed two issues:

  • Narrow networks
  • Tighter utilization management compared to Medicare’s fee-for-service model

recent KFF report found that 35% of MA enrollees were in narrow-network plans in 2015. Payers have increasingly turned to narrow networks to control costs and improve quality of care. To take part in the narrower networks, physicians usually have to agree to payer demands concerning cost and quality.

“Differences across plans, including provider networks, pose challenges for Medicare beneficiaries in choosing among plans and in seeking care, and raise questions for policymakers about the potential for wide variations in the healthcare experience of Medicare Advantage enrollees across the country,” KFF said.

Another issue for hospitals and providers is that more payers involved in capitated plans like MA will result in more pressure on providers and hospitals to focus on the cost of care, Michael Abrams, partner at Numerof & Associates, told Healthcare Dive.

“With Republican control of the federal government, it is conceivable that Medicare Advantage will become a centerpiece of CMS’ strategy to control spending growth.”

There’s also the issue of having too few MA payers in some regions. Aneesh Krishna, partner in McKinsey & Company’s Silicon Valley office, told Healthcare Dive the concentration of MA plans in certain markets is a worry for providers. “This concern would be magnified in markets where there is a similarly high concentration in commercial segments from the same payers, and where overall MA penetration is high,” he said.

There’s also a potential payment issue. MA generally reimburses at a slightly higher level than traditional Medicare, but utilization is managed more tightly. Krishna said providers willing and capable of sharing medical cost savings are “likely to see more benefit from the shift to Medicare Advantage plans.” However, MA networks are often narrow, which means providers will need to weigh the relative price/volume trade-offs of accepting MA.

More MA growth in the coming years

MA will have more payers and members than ever next year and the two largest payers, UnitedHealth and Humana, are expected to increase their footprint. Despite new payers showing interest in the market, Jacobson expects the market break down will look similar in 2018. She said small payers entering the market will offset the plans exiting MA next year.

The Congressional Budget Office (CBO) and HHS both project MA enrollment will continue to grow over the next decade. The CBO estimated that about 41% of Medicare beneficiaries will have an MA plan in 2027. UnitedHealth even predicted half of Medicare beneficiaries will eventually have an MA plan.

MA’s popularity with payers is easy to understand — 10,000 people turn 65 every day. The CBO expects 80 million Americans will be eligible for Medicare by 2035.

There’s also an opportunity in the MA market to sign up members quickly. Rachel Sokol, practice manager of research at Advisory Board, told Healthcare Dive that utilizing a strong marketing engine allows payers to grow MA membership. This is quite different from the employer-based market, which relies on payers working with companies.

Potential MA barriers

The MA market is largely positive for payers, but it does face challenges, including:

  • A small number of payers dominate the market
  • The CMS expects improved efficiency and savings
  • There is increased federal oversight, especially concerning possible overpayments to MA insurers

CMS is all in supporting MA plans and its marketspace. The agency last week proposed a rule with an aim toward improving quality and affordability in contract year 2019. According to the agency, the number of plans available to individuals will increase from about 2,700 to more than 3,100.

The agency is proposing to expand the definition of quality improvement activity to include fraud reduction activities, changing the medical loss ratio (MLR) requirements for Medicare Advantage plans. This change should excite payers because they can add the administrative service to the MLR ratio they are required to spend on healthcare, which is at least 85%. CMS states it believes the service will help combat fraud.

For now, the MA market is consolidated around only a handful of payers. UnitedHealth and Humana have more than 40% of the market. UnitedHealth has one-quarter on its own. KFF said UnitedHealth, Humana and Blue Cross Blue Shield affiliates make up 57% of MA enrollment and the top eight MA payers constitute three-quarters of the market.

Also, CMS is imposing improved efficiency in the traditional Medicare program. This could ultimately affect MA. Accountable care organizations (ACO) and bundled payments will “put downward pressure on the benchmarks used to set payment rates for Medicare Advantage plans,” Wiggins said.

This pressure will result in MA payers needing to either cut costs or trim benefits. “The former is difficult, except through narrow networks, and the latter will diminish the attractiveness of Medicare Advantage plans,” he said.

Then there’s the 800-pound gorilla in the market — potential overpayments. The Department of Justice (DOJ) has joined whistleblower lawsuits against UnitedHealth Group concerning MA overpayments. The lawsuits allege that UnitedHealth changed diagnosis codes to make patients seem sicker, which resulted in higher reimbursements to the insurer. A federal judge threw out one of the lawsuits in October.

The DOJ is investigating other MA payers for the same reason, and Congress is also interested. Sen. Charles Grassley (R-Iowa), chairman of the Senate Judiciary Committee, sent a letter to CMS Administrator Seema Verma in April questioning what CMS is doing to “implement safeguards to reduce score fraud, waste and abuse.” Grassley said there was about $70 billion in improper Medicare Advantage payments between 2008 and 2013 because of “risk score gaming.”

It’s understandable that investigators and Congress have grown interested in MA payers. The federal government paid $160 billion to MA payers in 2014. The CMS estimated about 9.5% of those payments were improper.

The combination of billions being paid to insurers, the potential for fraud and growing membership numbers make MA ripe for oversight. The stability of the market, particularly compared to other options for payers, however, will mean growth continues.

 

Medicare Advantage will have more enrollment, lower premiums in 2018

http://www.healthcaredive.com/news/medicare-advantage-will-have-more-enrollment-lower-premiums-in-2018/506293/

Dive Brief:

  •  The CMS says Medicare Advantage (MA) members will have more choices and lower premiums in 2018. Medicare open enrollment starts on Oct. 15.
  • The average MA monthly premium is expected to decrease by about 6% from $31.91 in 2017 to $30 in 2018. The CMS said 77% of MA enrollees who stay with their current plan will have the same or lower premiums in 2018.
  • MA’s enrollment is expected to increase by 9% to 20.4 million in 2018. The CMS expects that slightly more than one-third of Medicare enrollees will have an MA plan next year.

Dive Insight:

While the CMS has talked negatively about the Affordable Care Act (ACA), CMS Administrator Seema Verma is a big fan of MA. Verma (a candidate for HHS secretary in the wake of Tom Price’s departure) said MA and Medicare Part D “demonstrate what a strong and transparent health market can do — increase quality while lowering costs.”

Payers are enjoying positive financial numbers in the MA market. UnitedHealth Group said recently that it believes eventually half of all Medicare beneficiaries will have an MA plan. Payers are looking at the MA market for growth opportunities. In some cases, payers, such as Humana, are cutting back on ACA plans and investing more in MA.

Despite the CMS’ overall support of MA, the agency still sees one way to improve the program. The CMS wants MA payers to provide current and accurate information about their providers. The CMS found that 45% of MA provider directories had incorrect information, such as listing which providers are taking new patients, or providing the wrong phone numbers and addresses.

Currently, the CMS can only review MA plans’ provider networks when there is a triggering event. This can include when the insurance company starts in MA or extends its coverage, or the CMS receives a complaint about provider network issues. The CMS wants to have more oversight over provider network information, so that it can ensure the information is up to date.

While MA plans have been popular with the CMS, members and payers, there is a concern about a small number of payers monopolizing the market. The Kaiser Family Foundation said UnitedHealth controls nearly one-quarter of the MA market and is a major MA player in 42 states and the District of Columbia. KFF found UnitedHealth, Humana and Blue Cross Blue Shield affiliates make up 57% of MA enrollment and the top eight MA payers comprise three-quarters of the market.

Another issue for MA payers is that federal investigators are concerned about how much MA is paying insurers. The Department of Justice (DOJ) is investigating payments to insurance companies involved with MA.

Two of the bigger cases involve UnitedHealth. The payer is involved in two whistleblower lawsuits that allege MA overpaid the insurer by billions. The DOJ joined the lawsuits, which allege that UnitedHealth changed diagnosis codes to make patients seem sicker, which resulted in higher reimbursements to the insurer.

The CMS estimated that it overpaid $14.1 billion in 2013 to MA organizations. Medicare Advantage payers received about $160 billion in 2014. The CMS estimated about 9.5% of those payments were improper.

1 in 3 People in Medicare is Now in Medicare Advantage, With Enrollment Still Concentrated Among a Handful of Insurers

http://www.kff.org/medicare/issue-brief/medicare-advantage-2017-spotlight-enrollment-market-update/?hsCtaTracking=cf7ca7bd-f263-4b1f-9f13-7153c1da02a1%7Ceb71522c-161b-4f47-906e-5abc935ef3b4

Medicare Advantage plans have played an increasingly larger role in the Medicare program as the share of Medicare beneficiaries enrolled in Medicare Advantage has steadily climbed over the past decade.  The trend in enrollment growth is continuing in 2017, and has occurred despite reductions in payments to plans enacted by the Affordable Care Act of 2010 (ACA).  This Data Spotlight reviews national and state-level Medicare Advantage enrollment trends as of March 2017 and examines variations in enrollment by plan type and firm. It analyzes the most recent data on premiums, out-of-pocket limits, and quality ratings.  Key findings include:

  • Enrollment Growth. Since the ACA was passed in 2010, Medicare Advantage enrollment has grown 71 percent. As of 2017, one in three people with Medicare (33% or 19.0 million beneficiaries) is enrolled in a Medicare Advantage plan (Figure 1).

 

  • Market Concentration. UnitedHealthcare and Humana together account for 41 percent of enrollment in 2017; enrollment continues to be highly concentrated among a handful of firms, both nationally and in local markets. In 17 states, one company has more than half of all Medicare Advantage enrollment – an indicator that these markets may not be very competitive.

 

  • Medicare Advantage Penetration. At least 40 percent of Medicare beneficiaries are enrolled in Medicare private plans in six states: CA, FL, HI, MN, OR, and PA. In contrast, fewer than 20 percent of Medicare beneficiaries are enrolled in Medicare Advantage plans in 13 states, plus the District of Columbia.

 

  • Premiums and Cost-Sharing. While average Medicare Advantage premiums paid by MA-PD enrollees have been relatively stable for the past several years ($36 per month in 2017), enrollees may be liable for more of Medicare’s costs, with average out-of-pocket limits increasing 21 percent and average Part D drug deductibles increasing more than 9-fold since 2011; however, there was little change in out-of-pocket limits and Part D drug deductibles from 2016 to 2017.

Medicare Advantage enrollment is projected to continue to grow over the next decade, rising to 41 percent of all Medicare beneficiaries by 2027.1  As private plans take on an even larger presence in the Medicare program, it will be important to understand the implications for beneficiaries covered under Medicare Advantage plans and traditional Medicare, as well as for plans, health care providers and program spending.