Medicare Advantage 2016 Spotlight

May 25, 2016 California Broker Magazine

HEALTHCARE

medicareadvantageMedicare Advantage 2016 Spotlight
The number of Medicare beneficiaries enrolled in Medicare Advantage has climbed steadily over the past decade; this trend in enrollment growth continues in 2016. The enrollment growth has occurred despite provisions under the ACA that reduce payments to plans. As of 2016, the payment reductions have been phased in fully in 78% of counties, accounting for 70% of beneficiaries and 68% of Medicare Advantage enrollees, according to a study by the Kaiser Family Foundation. The following are study highlights:

  • Medicare Advantage enrollment has increased in virtually all states over the past year. Almost one in three people on Medicare (31% or 17.6 million beneficiaries) is enrolled in a Medicare Advantage plan in 2016. The penetration rate exceeds 40% in five states.
  • 18% of enrollees are in a group plan. Employers and their retirees still favor local PPOs over HMOs.
  • Enrollment is still highly concentrated. If Aetna acquired Humana with no divestitures in 2016, the combined firm would account for 25% of Medicare Advantage enrollees nationwide. UnitedHealthcare and Humana account for 39% of enrollment in 2016.
  • Premiums were relatively constant from 2015 to 2016 ($37 a month in 2016 versus $38 a month in 2015), although premiums vary widely across states, counties, and plan types.
  • In 2016, the average enrollee had an out-of-pocket limit of $5,223, which is nearly $1,000 higher than in 2011.
  • 31% of the Medicare population is enrolled in a Medicare Advantage plan. Total Medicare Advantage enrollment grew 5%, from 2015 to 2016. This reflects the influence of seniors aging on to Medicare and beneficiaries shifting from traditional Medicare to Medicare Advantage.
  • 64% of Medicare Advantage enrollees are in HMOs; 23% are in local PPOs; 7% are in regional PPOs; 1% are in private fee-for-service plans; and 4% are in other types of plans including cost plans and Medicare medical savings accounts.
  • Enrollment in private fee-for-service plans has declined slowly since the Medicare Improvements for Patients & Providers Act (MIPPA) of 2008. Under the law, in most parts of the country, private fee-for-service plans must have a provider network. About 1% of Medicare Advantage enrollees are in these plans. 26% of enrollees in private fee-for-service plans are in counties in which private fee-for-service plans are exempt from network requirements.
  • Medicare Advantage enrollment in California grew 6% from 2015 to 2016.
  • 44% of beneficiaries in Los Angeles County, California are enrolled in Medicare Advantage plans compared to only 11% of beneficiaries in Santa Cruz County, California.
  • The average MA prescription drug enrollee pays a monthly premium of about $37, which is 1% less than in 2015. Actual premiums are $28 a month for HMOs, $63 a month for local PPOs, and $76 a month for private fee-for-service plans. Average Medicare Advantage premiums for HMOs and local PPOs have decreased since the ACA was enacted while average premiums have increased for regional PPOs and private fee-for-service plans.
  • In 2016, 81% of Medicare beneficiaries had a choice of at least one zero premium MA prescription drug plan. From 2015 to 2016, the share of enrollees in zero premium MA prescription drug benefits remained relatively unchanged (48% in 2015 versus 49% in 2016). Fifty-nine percent of HMO enrollees are in zero premium plans; 38% are in regional PPOs; and 22% are in local PPOs. No zero premium private fee-for-service plans plans were offered in 2015 or 2016.
  • The average out-of-pocket limit for a MA prescription drug enrollee is $5,223, up from $5,041 in 2015 and $4,313 in 2011. The share of enrollees in plans with limits above $5,000 has greatly increased across all plan types. Fifty-two percent of enrollees are in plans with limits above $5,000 in 2016 compared to 46% in 2015. Thirty-seven percent of enrollees in 2016 are in plans with limits at the $6,700 maximum, compared to 32% in 2015 and 17% in 2011. Ninety-nine percent of regional PPO enrollees and 62% of local PPO enrollees are in plans with limits above $5,000 in 2016. In comparison, 45% of HMO enrollees are in plans with limits above $5,000 in 2016.
  • The standard Medicare Part D plan has a $360 drug deductible and 25% coinsurance up to an initial coverage limit of $3,310. That is followed by a coverage gap (the doughnut hole) in which beneficiaries pay a larger share until their total out-of-pocket Part D spending reaches $4,850. After exceeding this catastrophic threshold, beneficiaries pay 5% of the cost of drugs.
  • 95% of Kaiser Permanente’s enrollees are in HMOs. In contrast, enrollment in UnitedHealthcare and Humana plans is mostly in HMOs, but includes significant shares in local and regional PPOs. Humana’s distribution continues the shift from earlier years when a much larger share of Humana’s enrollees was in private fee-for-service plans plans. Enrollment in BCBS plans is split between HMOs (46%) and local PPOs (41%), with the remainder in regional PPOs and other plan types including private fee-for-service plans plans.
  • Kaiser Permanente’s presence is more geographically focused than other major national employers, with a heavy concentration in California, Colorado, the District of Columbia and Maryland.
  • Medicare Advantage enrollment could become more concentrated if Aetna’s acquisition of Humana and Anthem’s acquisition of Cigna are approved, particularly if few divestitures are required. If no divestitures are required in Aetna’s acquisition of Humana, the combined company would account for 25% of Medicare Advantage enrollment nationwide. UnitedHealthcare accounts for 21% of enrollment this year.
  • The Anthem’s acquisition of Cigna would have a less visible affect on the national Medicare Advantage market. Nationwide, Anthem accounts for 3% of Medicare Advantage enrollment and Cigna accounts for another 3%.
  • For many years, CMS has posted quality ratings for Medicare Advantage plans. In 2016, 68% of plans had four or more stars. In focus groups, seniors have said that they don’t use the star ratings to select a plan. Nonetheless, the star ratings may be correlated with factors that seniors do use to select their plan, including provider networks, and plan benefits and costs, and thus may be correlated with enrollment.
  • The Congressional Budget Office projects that about 41% of Medicare beneficiaries will be enrolled in Medicare Advantage in 2026. This growth may prompt some to question what it will mean if the preponderance of beneficiaries are in Medicare Advantage plans.

Study Shows That Private Exchanges Help Retain Employees
Seventy-two percent of employees using a private exchange say they are more likely to remain with their employer because of their benefit program, according to a new Liazon survey. The survey findings suggest that retention can get a boost from increased engagement and awareness of benefits, including a better understanding of their value in total compensation package. Ashok Subramanian of Liazon said, “The retention case is incredibly strong for private exchanges. The data show us that employees appreciate their benefits more when they are engaged in the process of selection and view the full cost of their plans. As private exchanges become a more popular form of benefit delivery, employers are beginning to recognize the model as a way to communicate the value of the benefits they are offering to their workforce.”

When asked to compare their experience using an exchange to the traditional method of benefit distribution, 83% of employees said they are more engaged in their health care decisions and 77% said they value their benefits more. Further, by increasing transparency into employer contributions and the full cost of benefits, private exchanges help employees better understand and appreciate their benefits as part of their compensation. In fact, 85% of respondents using an exchange, for the first time, said that they are more aware of their company’s contribution to their benefit costs and 81% said they value their company’s contribution more. For more information, visit www.liazon.com.

Obamacare Subsidy Being Funded Unconstitutionally
by Eric Wilson
About a year ago, U.S. District Court Judge Rosemary Collyer ruled that the House of Representatives could sue the president over how he was enforcing the ACA. In May, she ruled that the administration is violating the law in the way they are reimbursing health insurance carriers who provide coverage to lower income Americans. The ruling was put on hold in anticipation of an appeal by the Obama administration. It’s the first time in history that Congress was allowed to sue the executive branch over a disagreement about how to interpret a statute. Obama administration lawyers are expected to argue that the suit should be thrown out of court on the grounds that the House of Representatives cannot sue the executive branch.

The House of Representatives argues that the administration has overstepped its authority. Judge Collyer agreed stating, “The constitution says, No money must be drawn from the Treasury, but in Consequence of Appropriations made by law.” The administration is paying billions to insurance companies for the extra cost to provide health insurance. The ACA allows for cost sharing, which based on income that could reduce deductibles, co-pays, and out-of-pocket maximums for ACA Silver plans. The law also states that insurers that enroll eligible, low income Americans must cover the costs of their deductibles and co-payments, but the federal government must make periodic and timely payments to cover those costs. Congress says it has not appropriated those costs. The administration had asked Congress for appropriations to cover those costs. When the request was not honored, the HHS said it could continue to pay these required reimbursements. The case The House of Representatives v. Burwell will move to the U.S. Court of Appeals for the District of Columbia. In court papers the administration warned that a court victory for the House of Representatives would lead to a spike in insurance premiums for Americans and would force the government to pay more in tax credits to insurance policyholders.

If the House does not prevail, insurers will raise rates to offset the losses on these products or continue to withdraw from the marketplace. If there are fewer insurance carriers participating in the marketplace, there will be less competition, which is likely to drive up premiums. Because the ruling was put on hold, it will not have an immediate affect on the law. It will add to the debate about the President’s signature achievement leading up to the November 8th election. The Appeals court will probably not rule until the President is out of office.

Eric Wilson is President of I Sell Health, A Chicago area health insurance agency. He has been serving clients throughout the country since 2004. He Specializes in Individual Health, Group Health, and Medicare, and planning a tax free retirement. He is also an expert on the Affordable Act.

Expensive Drugs Are Becoming More Accessible Under Exchange Plans
ACA exchange plans are making some drugs more accessible to patients in 2016. Plans are less likely to place all drugs for conditions, such as HIV, cancer, and multiple sclerosis (MS) in a class on the highest cost-sharing tier, according to a report by Avalere. The study looked at Silver plans across 20 classes of medications. In five medication classes, some plans all drugs on the highest tier including drugs to treat HIV, cancer, and MS. However, fewer exchange plans are doing so in 2016 than in the prior two years.

As in prior years, the anti-angiogenics class, used to treat cancer, was most often subject to universal placement on the specialty tier. Half of all Silver plans placed all covered drugs in this class on the specialty tier in 2016. Nearly one-third of Silver plans place all covered MS drugs on the specialty tier as well, though this rate is down 14% from 2015. The sharpest decline is for molecular target inhibitors at 18%. For these three classes, 2016 reversed the sharp increase in this tiering structure.

Since the launch of exchanges in 2014, patient groups and policymakers have considered how formulary designs could affect patients’ ability to access medications. At the same time, plans strive to offer innovative benefit designs with low premiums. CMS has issued guidance discouraging plans from placing all drugs for a condition on the highest tier without regarding the cost of the medication. The federal government has not yet created a tool for regulators to evaluate benefit designs in this regard. California passed legislation preventing plans from placing all drugs for a condition on the highest formulary tier beginning in 2017. For more information, visit Avalere.com.

Competition Suffers Most If UnitedHealth Exits Obamacare In 2017
by Phil Galewitz of Kaiser Health News
If UnitedHealthcare follows through on its threat to quit the health insurance marketplaces in 2017, more than 1 million consumers would be left with a single health plan option, forecasted an analysis released Monday. A UnitedHealthcare pullout would be felt most in several states, generally in the South and Midwest, where consumers would be left with little choice of plans, the Kaiser Family Foundation said. In most of the 34 states where United operates this year, though, the effect would be modest for premiums and the number of plan options, Kaiser said. Kaiser’s analysis was made public a day before UnitedHealth Group, the insurer’s parent, is expected to announce 2017 plans for the ACA’s marketplaces that provide coverage to individuals who shop for their own health insurance.

Last year, UnitedHealthcare said it was losing hundreds of millions of dollars on the Obamacare plans and would decide its future participation by mid-2016. Health plans need to begin notifying states by May whether they plan to sell in marketplaces next year. More than one in four counties where UnitedHealthcare participates nationally would see a drop from two insurers to one if the company exits and isn’t replaced by a new entrant, and a similar number would go from having three insurers to two, the Kaiser analysis found. In total, 1.8 million enrollees would go from having a choice of three insurers to two, and another 1.1 million would go from having a choice of two insurers to one, the report said.

A UnitedHealth withdrawal would leave marketplace enrollees in Kansas and Oklahoma with only one insurer if another company does not move in, Kaiser said.

Its analysis cited the potential affect in other states if UnitedHealthcare drops out:

  • In Alabama, about two-thirds of enrollees — those living in 60 counties — would go from having a choice of two insurers to a single insurer, and the remaining 33% of enrollees in seven counties would have two insurers to pick from.
  • In Mississippi, 43% of enrollees in 50 counties would drop to just a single insurer and the remaining 57% in 32 counties would still have two.
  • In Arkansas, there would be a drop from four insurers to three insurers in every county if a new insurer did not replace the company.
  • In Georgia, nearly 50,000 marketplace enrollees, or 8% of the total, would be left with a choice of two insurers. Another 20,000 enrollees, or 3%, would have only one insurer if no new entrants replaced UnitedHealthcare.
  • Nationally, UnitedHealthcare’s participation on the exchanges had a relatively small effect on average premiums, based on Kaiser’s analysis of 2016 insurer premiums.

The company was less likely to offer one of the lowest-cost silver plans, where most enrollees sign up. When it did offer a low-cost option, its pricing was often close to its competitors. As a result, the weighted average premium for a benchmark silver-level plan would have been about 1% higher had United not participated in 2016. Federal subsidies in the marketplaces are based on the second-lowest silver premium. Benjamin Wakana, a spokesman for the Centers for Medicare & Medicaid Services, said the government expects insurers to make adjustments in entering and exiting states. The marketplace should be judged by the choices it offers consumers, not the decisions of any one issuer. That data shows that the future of the marketplace remains strong. UnitedHealth Group will release its first-quarter earnings Tuesday morning and CEO Stephen Hemsley is scheduled to discuss the results with analysts and investors at 8:45 a.m. ET. This story was produced by Kaiser Health News, an editorially independent program of the Kaiser Family Foundation.

For more information, visit pgalewitz@kff.org.

EVENTS

NAHU Show in New Mexico
The National Association of Health Underwriters (NAHU) is holding its 86th Annual Convention and Exhibition     June 26 to June 27 in Albuquerque, New Mexico. The summit will focus on helping service their clients amid legislative and regulatory changes affecting the health insurance market. For more information, visit nahu.org.

Watch Medicare Supplement Insurance Summit Sessions For Free
Insurance and financial professionals can get online access to presentations the 2016 National Medicare Supplement Insurance Summit, which was held April 25 to 27 in Kansas City.. It was sponsored by the American Association for Medicare Supplement Insurance. To access the recordings, visit medicaresupp.org.

IN CALIFORNIA

Burnham Benefits Executive Gets Award
The Annual Association for Corporate Growth gave its annual “Founders Award” to Kristen Allison, president and CEO of Burnham Benefits. The designation honors one long-standing business leader who fosters business growth while bringing goodwill through community service. Burnham, which now serves over 400 clients and employs more than 80 professionals across California and Washington D.C., began in 1995 with the acquisition of the firm, John Burnham & Company.

NEW PRODUCTS

Consumer Guide to Short-Term Care Insurance
The National Advisory Center for Short-Term Care Information released a guide to short-term insurance. Jesse Slome, director said, “Insurance agents have a very viable and sellable solution…for the large number of people who seek an LTC solution but where the cost of traditional long-term care insurance or their existing health is an issue.” To get the guide, visit www.shorttermcareinsurance.org.

Online Claims for Ancillary Benefits
Colonial Life now allows customers to file disability, accident, cancer, critical illness, hospital confinement and vision claims online. The process guides them through questions that are personalized for their type of coverage. Customers can easily upload supporting claim documentation from their computer or mobile device. The program won’t send the claim until all required questions have been answered. Once the claim is filed, customers get electronic confirmation the claim has been forwarded to Colonial Life. To use the online claims service, customers can log onto coloniallife.com and click on Individuals & Policyholders.

Cloud-Based Benefit Enrollment
EaseCentral has streamlined the administration of HR enrollment and quoting processes for insurance brokers. A process that used to take weeks to complete can be finished in minutes. Brokers can pull quotes and compare information from multiple carriers instantly from any desktop or mobile device. For more information, visit easecentral.com.

Critical Illness
Bankers Life is offering a new critical illness product, “Critical Benefit PLU.S (not a typo).” The plan covers cancer, heart attack, stroke, end-stage renal failure, coronary artery bypass graft and angioplasty. Critical Benefit PLU.S. covers these additional critical conditions:

  • Alzheimer’s
  • Permanent blindness
  • Permanent paralysis
  • Permanent deafness
  • Coma
  • Major organ transplant—surgery
  • Major organ transplant—active waiting list
  • Diabetic amputation

For more information, visit BankersLife.com.