Medigap Revisions in 2020: Understanding the Impact
On April 16, 2015, the Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”) was signed into law. As part of this legislation, MACRA will prohibit the sale of Medicare Supplement policies that cover Part B deductibles to “newly eligible” Medicare beneficiaries, effective January 1, 2020. “Newly eligible” beneficiaries are defined as individuals who: 1) have attained age 65 on or after January 1, 2020; or 2) first become eligible for Medicare due to age, disability or end-stage renal disease, on or after January 1, 2020. Plans currently covering Part B deductibles include C, F, and High Deductible F. After January 1, 2020, these plans will be referred to as Plan D, G, and High Deductible G respectively.
The NAIC’s Senior Issues Task Force has established a Medigap Subgroup to review changes specific to Medicare Supplement insurance, and to develop consumer guides and training material based on those changes. The Medicare Subgroup has developed an implementation guide, including a chart for recommended timelines of adoption and FAQs on the revisions. We recommend reviewing the implementation guide in detail, and have highlighted sections of the FAQ below:
We will continue to monitor Medigap Revisions in 2020, and will provide updates as they become available.
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Tags: Medicare Supplement
How to Succeed in the Booming Business of Medicare Advantage
There is great uncertainty surrounding attempts to repeal, reform, or replace the Affordable Care Act (ACA). But as we’ve noted, market participants can’t afford to sit still. Regardless of what happens, there is one very significant sector of healthcare that is positioned to succeed in this environment of uncertainty: Medicare Advantage (MA). As baby boomers age into qualification for Medicare, members are more likely to opt for plans that have benefits beyond what Medicare has traditionally offered. As a result, MA will present a significant source of growth for insurers. But to access a substantial share of this profit, plans need to urgently invest in key differentiating capabilities.
Some background: The federal government provides healthcare insurance for seniors through Medicare, which is administered by the Centers for Medicare and Medicaid Services (CMS). Although Medicare reimburses providers, it doesn’t cover all costs. This is where Medicare Advantage comes into play. Members have the option of purchasing MA plans from private insurers to cover out-of-pocket costs. The majority of Medicare recipients do not choose MA plans, either because they aren’t aware of them or because their preferred doctors may not always be part of the plans, but the numbers are growing. Based on CMS data, more than 32 percent of Medicare members in 2016 — some 19 million out of the 58 million total — enrolled in MA plans. But this is just the beginning. Analysis from Strategy&, PwC’s strategy consulting business, projects that over the next eight years, enrollment in MA will rise at a compounded annual rate of between 7 and 12 percent. Accordingly, we expect annual revenues for MA plans to rise from US$215 billion in fiscal year 2017 to more than $500 billion by 2025.
The underlying growth of MA is good news for healthcare payors. But not all participants will benefit equally. Given the structural and market forces at work, the total number of profitable MA plans is actually likely to decrease even as the number of participants surges. In this winner-take-all market, between $10 billion and $15 billion per year in total industry profits will shift toward a smaller number of higher-performing plans.
As they sign up more members, plans operating in the MA market in the coming years will have to grapple with a host of external and internal challenges to their profits. These include cost pressures, lower reimbursement rates, increasingly stringent compliance requirements, and the double-edged sword of performance-driven reimbursements. CMS conducts an annual assessment of MA plans based on performance in a range of areas, including patient experience, access to care, and clinical care outcomes. The results of this assessment are published as star ratings, with the best-performing plans receiving a five-star rating. CMS offers substantial financial incentives in the form of bonus payments to plans with a higher star rating. Additionally, a small proportion (i.e., up to 5 percent) of the reimbursement payments are tied to these quality ratings.
As time goes on, CMS will be basing a larger proportion of its payments on the ability of payors to deliver specific results and improvements in health metrics. At the same time, customers will likely flock to those plans with the highest quality ratings. This will create a virtuous circle. We project that within three years, 73 percent of the total MA membership will be serviced by plans with four or more stars, up from 34 percent today. Aside from attracting more members, plans with quality ratings of four or more stars will continue to receive a significant portion of the quality incentives paid by CMS, and have the resources to offer more attractive plans and reinforce their brands. The resulting increase in profit — an additional $800 million to $1.2 billion annually — means they’ll have larger cash flows to deploy for further investment in differentiated capabilities and market-position enhancement.
To achieve the desired performance levels and have a winning position in the MA market, insurance plans need to urgently invest in four key success factors.
Provider payment innovation/MACRA
Enhanced care models/care coordination
Proactive and member-centric risk management
Member-centric risk management that aligns with the way CMS regards regulatory compliance offers several clear advantages. It can predict “hot spots,” or future areas of concern, such as changes in coverage that may result in barriers to care, before they become full-blown citations; it also can help management prioritize allocation of resources to areas that will have the greatest impact. More fundamentally, plans can identify and address root causes that typically span organizational boundaries.
Member engagement and experience
Each of these four differentiating areas is important for success in the MA market. But to truly succeed, payors will need to build a coherent strategy that holistically ties these four areas with a corresponding “way to play.” For example, a clinic-based care coordinator, such as Illinois-based Riverside Healthcare, can emphasize in-person care experiences and maintain a low-cost model by automating or outsourcing operations including compliance, all while leveraging MACRA principles for its narrow network design. A regional plan with large membership, such as Florida-based managed care company Wellcare, should seek to enhance the member experience by expanding its digital footprint while developing proactive risk management and operational excellence capabilities that ensure compliant and low-cost operations.
Regardless of the path they choose, plans must begin investing in capabilities now. In the winner-take-all healthcare market of the future, passivity is not an option.
Tags: Medicare Advantage
8 Simple Ways to Get More (and Better) Client Referrals
I know some people who hate asking for referrals from their clients for fear of disturbing them or asking for “too much.” I understand the mentality, but I believe it is wrong.
When you get your clients to promote your agency in a simple and uncompromising way, it’s doing them a favor. Why? Referrals are what we might call social currency. We all like to recommend companies and quality products because it is a way to help each other.
Unfortunately, many insurance agents never properly prepare and train on how to request referrals in an effective and convenient way for both parties. This can lead to interactions like the following:
Agent: “If you are satisfied, could you maybe give me the names of three people who could also benefit from my excellent service?”
Customer: [uncomfortable pause] “Oh ... um ... well ... I guess you could call my ... I really don’t have phone numbers with me now ...”
Agent: “Sorry, but can you think a little harder about a few people before we end our meeting?”
I do not want your clients to lose the opportunity to make referrals, but at the same time, you shouldn’t have awkward conversations.
Here are eight ideas for generating great referrals:
“I am helping my clients increase their social status by facilitating the recommendation of an agency that is easy to work with, cares about clients and can save money for their friends.”
If you do not convince yourself of this, your problem may be more complex than simply needing referrals.
» It will be easy to explain and replicate for your clients.
» You are less likely to have an unwanted referral.
» You can develop promotional material for your products (brochures, etc.).
» Your clients will have an extra motivation to refer you and will be more willing to do so.
Explain to your client the benefits of having their family members know your contact information in case of an emergency. This can even be done as early as the first sale.
To the client, it will appear that you will be available to them at all times. For example, if you sell a policy to the mother of the family and she experiences an emergency, it’s important for other family members to have your contact info.
In the blank space, write the name of your client and give it to them to pass to their contacts.
Eliminate that risk by explaining the types of clients you serve and what you can offer them.
Be careful about describing your clients with a profile different from theirs, as it will make them doubt if they are with the right agency.
Here are two exercises that illustrate my point.
Exercise 1 — Ask your client: Excluding your co-workers or family, think of someone you know who would be happy to make sure their loved ones are protected, or to have a financial plan for their retirement. Take time until you have thought of someone.
Exercise 2 — Now think of a neighbor who would be happy to have those same services. The first question is more difficult to answer because the client will not know whom to refer.
The second question has fewer options, and I bet you yourself imagined your neighbor thanking you for helping them.
The point is, when you ask for referrals from your clients, ask them to think about a specific group of people from which it is easier to choose.
This block of text is a good place to request referrals, because your client will be reading the email and can forward the information to their contacts.
Use “Fwd my contact information” as your action message to remind the reader how to recommend you and above all, invite them to do so.
This accomplishes many things. It shows how much you appreciate their confidence in you. This will increase your chances of getting more contacts, and your social media followers will be able to see this.
It also reinforces to your existing clients that other people are so happy with your services that they are inviting their friends to get to know you. This social test will improve customer perception and retention.
This means that you can send a casual message to the person you’re connected by to request to be introduced.
Obviously, a lot depends on your relationship with that third person, but you never know what you can achieve by trying. Now it is my turn …
If any of the ideas presented in this article are useful and you know someone who might appreciate it, please share it.
You will be helping two people with a minimum of effort. Happy hunting.
The Future of Medicare Supplement - 7th Annual Market Projection Report
The Medicare Supplement market continues to offer long-term sustainability. Just over 75 million individuals are expected to be enrolled in the Medicare program by 2026 (a 32% increase over 2016). This means that by 2026 roughly 20 million more individuals will be added to the Medicare program with another 10 million being added by 2035.
CSG Actuarial research indicates Medicare Supplement enrollments will continue to grow markedly over the next 10 years, creating ever-increasing opportunities for insurance carriers, agents, and marketing organizations in the Medicare Supplement market (Graph 1).
There is a minimal amount of information available regarding Medicare Supplement market projections. CSG Actuarial has compiled data from various sources and developed actuarial models to project future Medicare Supplement enrollments and premium levels over the next 10 years.
Current Medicare Eligibility Assessment
To determine how the Medicare Supplement market is expect to grow over the next 10 years, we first evaluated the current Medicare population using the following demographic factors:
Age, gender, Eligibility Status, Income Level, Health Status, Area of Residence, Living Arrangement, Plan Type (Medicare Supplement, Medicare Advantage, Other)
Historical Medicare Supplement Assessment
To project the future of the Medicare Supplement market, we started by evaluating historical trends. Medicare Supplement policies in-force and premiums have rebounded the past nine years, fueled by an increase in annualized new premiums, which are up 91% since 2008. The increase in annualized new business premiums resulted in a leveling of the Medicare Supplement market penetration percentage from 2009-2013, followed by an increase in each year thereafter. In fact, the percentage of Medicare Beneficiaries who own a Medicare Supplement product increased 0.9 percent from 2014 to 2015, followed 0.8 percent from 2015 to 2016.
The growth in the Medicare Supplement market during the past nine years can mostly be attributed to three things:
As a result, the annual growth rate of Medicare Supplement beneficiaries has been at its highest rate in recent years coming in at 6.9% in 2015, followed by 5.8% in 2016. At the same time, the Medicare Advantage annual growth rate of beneficiaries dropped to 6.8% in 2015, followed by 5.1% in 2016, bringing the growth rate of Medicare Supplement and Medicare Advantage closer than it’s ever been.
Current Market Activity and Possible Impacts to Future Medicare Supplement Consolidation
As of last year’s report, Aetna’s proposed acquisition of Humana, and Anthem’s proposed acquisition of CIGNA were both getting increased regulatory scrutiny, with the U.S Justice Department suing to block the acquisition attempts citing concerns that the mergers would increase health-care costs and simultaneously reduce choice for consumers.
Since that time, Aetna’s proposed acquisition of Humana, and Anthem’s proposed acquisition of CIGNA have both been called off.
CSG Actuarial does not believe any potential merger consolidation will negatively impact the growth in the market. Based on our market perspective, at least 10 new carriers have entered or are in the process of entering the Medicare Supplement market in the last two years. We expect there will continue to be new carriers entering the market based on the favorable demographics, cost effective TPA solutions, sophisticated distribution options and reinsurers actively looking for new partnership opportunities.
Cost Sharing Plans and First Dollar Coverage
As commonly reported, Plans G and N continue to grow and grab market share in the overall Medicare Supplement market. In 2016, Plans G and N made up over 19% of the lives in the Medicare Supplement market, up from only 5% in 2010. A large portion of the growth in market share for Plans G and N is at the expense of non “first dollar coverage” plans, as can be seen in Graph 2.
Using data from the NAIC, CSG Actuarial grouped the Medicare Supplement lives for
2010 to 2016 into 4 categories:
Recent results and future projections continue to suggest the Medicare Supplement market offers very strong opportunities for growth for carriers, marketing organizations, and agents. As covered in detail in this paper, some of the primary drivers of this future growth and opportunity will be 1) the overall growth in Medicare, 2) a decrease in Retiree Health Benefits, and 3) slowed growth in the Medicare Advantage program when compared to early years of Medicare Advantage.
As the number of Medicare Beneficiaries continues to grow, from 57 million in 2016 to 75 million in 2026, it is becoming clear that those same individuals will increasing turn to private insurance (both Medicare Advantage and Medicare Supplement) to help cover their insurance needs. While some individuals will continue to receive Retiree Health Benefits, get coverage through Medicaid, or choose Traditional Medicare Coverage without any sort of supplemental coverage, these individuals will increasingly make up a smaller and smaller proportion of the total Medicare Beneficiaries.
Beyond those primary drivers, CSG Actuarial believes other factors such as overall market stability and low barriers to market entry will also contribute to the future growth in the Medicare Supplement market. Stability in the market in recent years has been driven by lower claim trends that have led to lower annual premium rate increases and higher company profits. Low barriers to entry in the Medicare Supplement market are a result of numerous experienced TPAs, distributors and re-insurers available to provide support as needed for new companies wishing to enter the Medicare Supplement market. Adding it all up, CSG Actuarial believes future growth trends within the Medicare Supplement market continue to be very positive.
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Tags: Medicare Supplement