Repeal of health insurance tax could bolster Medicare Advantage earnings, enrollment
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The Mad Rush to Sell Private Medicare Plans to Seniors
Health insurers across the U.S. will race to enroll more seniors in lucrative government-backed Medicare plans this month, even as a roiling debate over the role of private companies in health coverage shapes the presidential race.
The plans, known as Medicare Advantage, are the private-sector, taxpayer-financed alternative to traditional Medicare. Selling them has become a crucial profit center for the insurance industry: Baby Boomers are aging into the program, propelling its growth, while at the same time health insurance products sold to people under 65 are facing pressure from all sides.
The private plans also sit squarely in the middle of the race for the presidency: Some candidates for the Democratic nomination, including Senators Bernie Sanders and Elizabeth Warren, have backed a proposal to do away with private health insurance across all markets. Last week, President Donald Trump signed an executive order aimed at bolstering Medicare Advantage, and said Democrats would upend the program.
In 2019, about 22 million people, or roughly a third of all Medicare enrollees, got their Medicare coverage through the private plans. For each person who signs up, the insurers collect a fee from the government. It was $11,545 on average this year, which adds up to about $254 billion. The Medicare Advantage enrollment period opens Oct. 15.
Insurers see it as a lucrative market they can’t afford to pass by. Medicare products are the biggest business at the biggest health insurance company, UnitedHealth Group Inc.’s insurance unit. Centene Corp. agreed to pay $15 billion this year for WellCare Health Plans Inc. in part to get access to the company’s large Medicare business. Startups like Clover Health, which has raised more than $900 million from investors including GV, Alphabet Inc.’s venture capital arm, are targeting Medicare customers with new technologies intended to deliver care more efficiently.
UnitedHealthcare will sell Medicare coverage in 100 new counties in 2020, reaching 90% of the eligible market. Humana Inc., which specializes in Medicare Advantage, will expand to 29 new counties. Humana Chief Executive Officer Bruce Broussard told investors in July that membership was growing at the fastest pace in a decade, and the company expects to add half a million members this year. Cigna Corp., which has a comparatively smaller Medicare business, is expanding to 37 new counties next year and projecting 10% to 15% average annual membership growth through 2025. CVS Health Corp.'s Aetna unit is expanding to 264 new counties in 2020.
Medicare is especially critical to insurers as their traditional business selling health plans to employers and individuals slows. A smaller percentage of the U.S. workforce is enrolled in employer coverage than two decades ago, according to data from the Kaiser Family Foundation, a nonprofit health research group, as the cost of those benefits rises faster than workers’ earnings.
“We all know that 11,000 Americans turn age 65 every day and then the percent of those that choose” Medicare Advantage is accelerating, Anthem Inc. Chief Financial Officer John Gallina said at a conference in June. He called it “a huge opportunity that we’ve missed in the past, that we now need to capitalize on.”
Anthem’s Medicare Advantage membership grew by 25% in the 12 months ending June 2019, far faster than any other category. Anthem is expanding to 77 new counties in 2020.
Seniors in traditional Medicare can go to any doctor or hospital that participates, as most do. Those who choose Medicare Advantage plans trade that freedom of choice for an insurance company’s more limited network. In exchange, they get extra benefits. Medicare Advantage policies often wrap in prescription-drug plans, vision and dental care. Many offer free gym memberships or fitness programs. They also cap members’ total out-of-pocket costs. In traditional Medicare, seniors have to buy policies known as Medicare supplement or Medigap plans to limit their out-of-pocket expenses.
Starting in 2019, a federal rule change permitted Medicare Advantage plans to offer other perks like transportation and meal delivery. The goal is to address so-called social determinants of health, the many non-medical aspects of people’s lives that affect their well-being. Plans will offer a greater variety of those benefits in 2020.
Some Cigna plans in Texas will pay for air conditioners for the first time next year. Anthem will offer pest-control services, because vermin can affect chronic health conditions such as asthma. Carriers are also testing benefits like adult day care; home safety improvements, like grab bars, to prevent falls; and in-home help for people who need assistance bathing or dressing.
“We actually find a lot of beneficiaries are living in environments that really need support and help,” said Martin Esquivel, vice president of Medicare product management at Anthem.
Medicare doesn’t provide those things in its traditional fee-for-service program, partly because of the risk of inappropriate payments or fraud. In Medicare Advantage, the government’s payment to plans is limited, so that risk is managed by the plans.
The growth of Medicare Advantage shows demand for private managed-care plans exists even when seniors have a purely public option. “No one’s forcing them to do this,” said Dan Mendelson, founder of consultant Avalere Health and a partner at private equity firm Welsh Carson Anderson & Stowe. Seniors are increasingly comfortable giving up some choice of doctors in exchange for Medicare Advantage’s perks, he said. “It’s the choice that makes it really remarkable, that seniors are choosing this.”
While two-thirds of Medicare enrollees choose to stick with the original program, that share is declining. Mendelson said Medicare Advantage enrollment has grown by 8% annually in recent years. At that pace, more than half of Medicare members will be in private plans by 2025, he estimates.
Many people can get Medicare Advantage for no additional premium beyond what they pay for traditional Medicare. The average monthly premium for Medicare Advantage is $23 in 2020, down from $26.87 the prior year, according to the Centers for Medicare and Medicaid Services. It’s at the lowest level since 2007.
Plans have historically been paid generously. A decade ago, Medicare paid private plans 14% more than it would have spent for the same beneficiaries in the traditional program, according to the Medicare Payment Advisory Commission, known as MedPAC, which counsels Congress on Medicare policy. That helped finance additional benefits that enrollees found attractive, but it raised the program’s costs and put little pressure on plans to deliver more efficient care. The 2010 Affordable Care Act lowered those payments. They’re now about 1% above traditional Medicare payments, according to MedPAC.
People who choose to enroll in Medicare Advantage plans also typically have lower health spending before they enroll, compared with similar people in traditional Medicare, according to an analysis by the Kaiser Family Foundation. That means the way payments are set “may systematically overestimate expected costs of Medicare Advantage enrollees,” the Kaiser researchers wrote. Plans have been also faulted by government watchdogs for improperly denying care.
Medicare Advantage plans pay about 86% of their premium revenue out in medical claims, a similar proportion to other health insurance products, according to a separate Kaiser Family Foundation report. But the opportunity to profit is higher. Partly because Medicare beneficiaries use more medical care than younger people, there’s more money at stake for each member. Gross margins in Medicare Advantage – the difference between premiums collected and claims paid, before counting administrative costs – are about $1,600 per enrollee, roughly double the value in commercial plans, according to Kaiser’s analysis.
“This appears to be a fairly profitable market,” said Tricia Neuman, director of the Kaiser Family Foundation’s program on Medicare policy. The group sees more carriers enter the market than exit each year. “If it weren’t profitable, they wouldn’t be doing it,” Neuman said.
“We had no idea how hard it would be, how long it would take, the infrastructure we’d have to develop,” said Vivek Garipalli, chief executive officer of Clover Health. The company has about 42,000 members, mostly in New Jersey.
Other new technology-focused insurers are trying to break into the market. Oscar Health announced its first Medicare plans this year. Startup Devoted Health, which is led by former Obama administration officials, raised $360 million to launch its Medicare Advantage plans in 2019.
Those companies are betting that technology can deliver better care more efficiently, by using data to help physicians manage patients with chronic conditions, for example. Medicare Advantage is an ideal proving ground to test that idea, because plans make money if they can deliver savings without compromising quality.
“Health care has effectively had zero productivity gains over the last 20 years,” said Bob Kocher, a partner at venture firm Venrock. The firm backed Devoted Health and Kocher served as the company’s chief medical officer for a year. “There should be a lot of pent-up opportunity here to apply technology to make health care much more productive, and that would also make health care more affordable.”
--With assistance from Hannah Recht.
This article was provided by Bloomberg News.
Humana increased its full-year projections for Medicare Advantage growth to a “range of 480,000 to 500,00 members,” or 16% growth for 2019. That compares to a previous range of 415,000 to 440,000, the insurer reported.
Humana is the latest health insurer to tout solid profits thanks in part to seniors flocking to Medicare Advantage. Centene, WellCare Health Plans, UnitedHealth Group and Anthem have already reported record Medicare Advantage enrollment as well and Cigna will release its updated second-quarter figures on Thursday.
Medicare Advantage plans contract with the federal government to provide extra benefits and services to seniors, such as disease management and nurse help hotlines, with some even providing vision and dental care and wellness programs. And the federal government has changed rules to allow private health insurers to offer more supplemental benefits in Medicare Advantage plans they sell.
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By Taylor McDonald – CSG Actuarial – May 7, 2019
CSG Actuarial, with information from the NAIC and other sources, reports total earned premiums in the Medicare Supplement market in 2018 totaled $32.4 billion, a 4.9% increase over 2017. The total Med Supp lives covered in 2018 increased to 14.05 million, up 3.9% from 2017. The top 12 carriers in terms of 2018 Medicare Supplement premiums were:
The 2018 overall Med Supp market loss ratio of 79.0% reflects a continued trend in the market of the overall loss ratios creeping back up towards “Pre-Modernized” levels of around 80%.
The Bold Goal program has improved population health for Humana Medicare Advantage members since 2015.
By Jessica Kent – HealthPayerIntelligence – April 25, 2019
Medicare Advantage members living in Humana’s seven original Bold Goal communities have seen an improvement in population health, with these individuals experiencing a 2.7 percent reduction in their Unhealthy Days since 2015, according to Humana’s 2019 Bold Goal Progress Report.
Humana’s Bold Goal program aims to improve the health of the communities it serves 20 percent by 2020 and beyond. Since the program began, Humana has used the CDC’s health-related quality of life measurement, known as Healthy Days, to track and trend progress.
Healthy Days takes the whole person into account by measuring self-reported physically and mentally unhealthy days over a 30-day period. The healthy days measurement aligns with the Bold Goal’s aim to address individuals’ physical well-being, along with the social determinants of health, such as food insecurity, loneliness, and social isolation.
San Antonio, the first Bold Goal community, is halfway to its 20 percent healthier goal, with members in this area experiencing a 9.8 reduction in unhealthy days. Humana worked with community organizations, physician practices, and others to screen 500,000 members, employees, and patients for social determinants of health in 2018, leading to the gains in everyday wellness.
The report stated that on average, a Humana Medicare Advantage member who is food insecure may experience 26.6 unhealthy days, while Medicare Advantage members who experience loneliness may see an average of 24.4 unhealthy days.
Humana noted that of those experiencing food insecurity, 66 percent have to choose between food and medical care. Food insecure members are also 50 percent more likely to be diabetic and 60 percent more likely to have congestive heart failure.
Those experiencing loneliness and social isolation are four times more likely to be re-hospitalized within a year of discharge, and 64 percent more likely to develop dementia.
These non-clinical influences can also have detrimental effects on mental health. For those Bold Goal communities that did not see significant improvements in population health, Humana stated that one of the contributing factors was a higher number of mentally unhealthy days versus physically unhealthy days.
“Throughout the country, we are seeing a rise in mental health concerns as well as loneliness and social isolation, especially in our aging adult population. In fact, since the 1980s, the rates of loneliness in adults over the age of 45 have doubled,” said Caraline Coats, Vice President of Bold Goal and Population Health Strategy.
“With the knowledge that mentally unhealthy days and new membership are driving many of our results, several of our Bold Goal communities are looking at ways to address this growing need. We’ve already seen efforts emerge in Tampa Bay, New Orleans and Louisville.”
In Louisville, Kentucky, the Louisville Health Advisory Board’s Behavioral Health Committee trained more than 2200 volunteers in emergency response techniques designed to prevent suicide.
The Tampa Bay Bold Goal Health Collaborative has also been focused on addressing the behavioral health needs of members, partnering with mental health professionals, faith-based organizations, and other stakeholders.
In addition to the social determinants of health, the Bold Goal program aims to improve population health by managing chronic conditions. Nearly 77 percent of Americans aged 65 or older are living with two or more chronic conditions, the report said, making chronic disease management imperative for overall health.
“A large part of Humana’s focus is to help people living with multiple chronic conditions improve their health, which requires an integrated approach,” said Bruce D. Broussard, Humana’s President and CEO.
“The Bold Goal is not just our north star; it’s a quantitative way for us to address the holistic needs of multiple populations, and to measure our progress. This year’s report reflects our track record of success in managing chronic conditions over time. Given current demographic trends, we expect to see continued demand for a support structure that addresses social needs, along with clinical ones.”
In Knoxville, Tennessee, the Knoxville Health Advisory Board has focused on addressing diabetes, which has led to positive trends for low-income Humana Medicare members. These individuals experienced a 2.9 reduction in unhealthy days in 2018.
Going forward, Humana and its Bold Goal communities will continue to address the many factors that influence well-being, with an understanding of the important roles physical, mental, and social elements play in members’ overall health.
“The social barriers and health challenges that our Medicare Advantage members and others face are deeply personal,” said William Shrank, MD, Humana’s Chief Medical Officer.
“This requires us to become their trusted advocate that can partner with them to understand, navigate and address these barriers and challenges. With Healthy Days as our barometer, we are able to track and trend population health, measure outcomes and triage members in unique ways to the resources they need.”
Through the program – which targeted at both Medicare Advantage beneficiaries and commercial members – Humana will support better care coordination and health outcomes through financial incentives.
The insurer said it will provide compensation for better care navigation based on quality and cost metrics across various parts of the patient journey ranging from inpatient admissions, ED visits, prescription drugs, diagnostics and radiology.
Humana lists 16 providers as inaugural participants in the program including multiple members of The US Oncology Network, along with health systems and practices like Cincinnati-based Tri Health and Kentucky’s Baptist Health Medical Group.
While the CMS Innovation Center has developed its own Oncology Care Model, the program is focused on episodes of care surrounding chemotherapy administration.
Humana is hoping to improve general cancer care for patients over the period of a year by emphasizing more face time between physicians and patients, access to proactive health screenings and the increased use of data analytics to better coordinate care around patients.
The new oncology program is the payer’s fourth specialty-care payment model, alongside bundled payment programs for Medicare Advantage spinal fusion patients and total joint replacement patients, as well as maternity care bundled payment programs for commercial group members with low-to-moderate risk pregnancies.
Humana has more than 2 million Medicare Advantage members and around 115,000 commercial plan members who are cared for by primary care physicians in value-based payment relationships.
In the company’s 2018 report on its value-based care practices, Humana found that MA members with physicians in value-based care relationships experienced 7 percent fewer emergency room visits and 5 percent fewer hospital admissions
Medical costs for patients who were affiliated with physicians in Humana MA value-based agreements were also 15.6 percent lower than traditional Medicare.
Humana’s recent activities are indicative of the larger payer industry making a full-scale business transition to value-based care.
Case in point, UnitedHealthcare is launching a Care Bundles program next year that will offer providers across 30 states the option of participating in bundled payment arrangements for eight medical procedures for MA patients.
Likely return of the health insurance tax to impact MA profits
By Susannah Luthi – ModernHealthCare – March 1, 2019
Congress appears unlikely to delay the health insurance tax next year. If that happens, Medicare Advantage plans would see the biggest impact, analysts and insurers say.
On Wednesday, a bipartisan group of House lawmakers introduced a suspension of the tax, known as the HIT, through 2021. The tax was in place for 2018, suspended in 2019 and is due to take effect again in 2020.
But as House lawmakers unrolled their proposal for another delay, senior congressional staff from both chambers and parties said they don't think it's likely to move before insurers start setting their ACA exchange rates next year.
One senior GOP aide said it's unclear how any of the smaller tax delays will get done, "let alone the big spending health care extenders."
Some insurance executives have been bracing for the possibility they won't get their delay. But they also haven't given up on urging Congress to step in and eliminate the tax or continue the moratorium from 2019.
In a quarterly earnings call in January, UnitedHealth Group CEO David Wichmann warned that the return of the HIT would increase healthcare costs by a total $20 billion for 142 million people.
"That causes the average senior couple to see their premiums raised by $500 per year and for families with small business coverage by about the same amount, around $480 or so per year," Wichmann said. "Our view is that outcome is unacceptable because healthcare already costs too much."
S&P analyst Deep Banerjee said a return of the HIT wouldn't necessarily affect insurers' profit margins for Affordable Care Act individual market exchange plans, where companies can pass the fee on to their customers through higher premiums.
However, he said, insurers are less likely to take this approach in the more lucrative Medicare Advantage market where competition between plans is so tight they don't want to risk losing enrollees.
The push for the HIT delay comes after the eight largest publicly traded insurance companies reported more than $21 billion in net income for 2018 on top of revenue of $718 billion, according to analysis by Modern Healthcare. Despite the HIT being in effect in 2018, insurers' earnings benefited from low medical cost trends, lower utilization of healthcare services, declining pharmacy costs and a lower tax rate, according to a report released Thursday by A.M. Best.
In a sign that Medicare Advantage insurers are worried about the HIT's potential impact on their markets, Humana CEO Bruce Broussard told investors earlier this month the HIT moratorium allowed Humana and the rest of the industry to make significant investments in benefits and drive better health outcomes, but its return will reverse that. "The return of the HIF in 2020 will negatively impact seniors across the nation in the form of reduced benefits and/or higher premiums," he said.
Broussard, during the company's first earnings call for 2019, said this is driving their lobbying push.
"We are working with partners to urge Congress to take legislative action to repeal the HIF for 2020 and beyond, recognizing that there is a sense of urgency given the rapidly approaching deadline for submitting bids for 2020 Medicare Advantage offerings," Broussard said.
On the flip side, UnitedHealth CFO John Rex in January indicated that the company is so diversified it's unlikely to feel a financial squeeze, warning that instead the tax would add to the cost burden of the insured.
"I'd be remiss to diminish $2.6 billion of our customers' funds just having been paid for the health insurance tax," Rex said. "That's still a very significant number for any company, I would say, and a burden for our customers."
In terms of the HIT's impact on premiums, Oliver Wyman Actuarial Consulting last year projected a likely increase of just over 2% annually. The firm predicted the biggest increase for Medicare Advantage — $241 per MA enrollee versus a $196 increase per person in the ACA individual market.
A senior Democratic aide said while there's been preliminary discussions on the staff level, the legislation doesn't seem to have a good chance of a House floor vote anytime soon.
And Rep. Earl Blumenauer (D-Ore.), who sits on the House Ways and Means Committee's tax policy and health panels, said this is partially because all the insurance taxes are figuring into the committee's broader discussion over where they want to go with taxes.
"For me, I don't think it's a good idea to be spun out on individual details until we've heard the big picture," the congressman told Modern Healthcare.
"There's a big agenda in terms of trying to deal with tax issues, and I think you don't want to deal with these things piecemeal until we find out where we're at, because they all interrelate," he added.
Reps. Ami Bera (D-Calif.), Josh Gottheimer (D-N.J.), Jackie Walorski (R-Ind.) and Kenny Marchant (R-Tex.) led the House proposal to delay HIT through 2021. Sens. Cory Gardner (R-Colo.), Jeanne Shaheen (D-N.H.), John Barrasso (R-Wyo.), Doug Jones (D-Ala.), Tim Scott (R-S.C.), and Kyrsten Sinema (D-Ariz.) led the Senate version in January.