Radar on Medicare Advantage

In advance of the 2021 Medicare Annual Election Period (AEP) that starts on Oct. 15, venture-backed Medicare Advantage firms like Alignment Healthcare and Clover Health are unveiling their plans for expansion while new startup insurers are declaring their intentions. Although the collective membership of startups is a drop in the bucket compared to the five major insurers that dominate two-thirds of the MA market, one expert says their focus on technology positions them for enrollment success during the COVID-19 pandemic, as long as they can follow through on the clinical side.

Given the increasing share of Medicare beneficiaries who select MA over fee-for-service Medicare, the maturity of the program, and the aging baby boomer population, “organizations are comfortable with both the costs and the revenue streams associated with [MA] and are building infrastructures from the ground up to be able to be successful,” observes Jason Montrie, president of Pareto Intelligence, a Convey Health Solutions company. “And I think we’re seeing there’s a lot of available capital. [Startups] are looking in new markets…where they think they can be successful, they can acquire new investors, and they can grow in a market that has a lot of tailwinds.”

In addition to unveiling details on its proposal to overhaul the Medicare Advantage quality bonus program (RMA 6/18/20, p. 3), the Medicare Payment Advisory Commission (MedPAC) in its June report to Congress recommended major reforms to the Part D program that would shift more drug costs from Medicare to payers and drug manufacturers (see pie charts below). Citing the use of high cost drugs pushing beneficiaries into the catastrophic phase of the benefit as leading to greater reinsurance spending, MedPAC once again recommended changing Medicare’s reinsurance subsidy from 80% to 20%. MedPAC would also do away with the coverage gap discount program and require drugmakers to provide discounts of at least 30% in the catastrophic phase.

MedPAC also suggested that under the current Part D structure, how much manufacturers will have to pay in coverage gap discounts may factor into their decisions about price increases or launch prices, and pointed out that coverage gap discounts for relatively low priced drugs make up a larger share of drugmakers’ revenues. “For drugs and biologics with prices near or above the catastrophic threshold, manufacturer discounts in the coverage gap are small compared with their revenue from Part D prescriptions,” the commission wrote. The table below outlines this phenomenon using 2018 data.

✦ In addition to offering premium discounts and/or rebates to commercial enrollees as a result of higher earnings during the COVID-19 pandemic, several Blues plans at press time unveiled premium-relief actions for Medicare Advantage enrollees. BlueCross BlueShield of Massachusetts, for one, said it would give MA members a one-month “premium holiday” before the end of 2020. As part of a plan to provide $70 million in premium rebates and discounts, Blue Cross and Blue Shield of Minnesota said it would extend about $38 million in premium relief to Medicare members, people who purchase individual health plans and certain business customers through one-time credits of 10% to 25%, according to the Star Tribune. And Blue Cross Blue Shield of Michigan last month issued about $15 million in refunds to Medicare Supplement and individual MA customers in the form of premium credits for March and April that were applied to their July premium bill, according to America’s Health Insurance Plans (AHIP). Visit AHIP’s ongoing summary page of insurers’ COVID-19 response actions at https://bit.ly/3iXsLdL.

✦ Norfolk, Va.-based Sentara Healthcare and Greensboro, N.C.-based Cone Health have signed a letter of intent to combine their regional, community-based health systems. Sentara, an integrated, not-for-profit system comprising 12 hospitals in Virginia and northeastern North Carolina, operates the Optima Health and Virginia Premier health plans, which have about 700,000 Medicaid members combined. Cone Health, a not-for-profit integrated health care network consisting of five hospitals in North Carolina, has a Medicare Advantage plan, HealthTeam Advantage, that serves 15,000 members. The combination is anticipated to close in mid-2021. Visit https://bit.ly/3iOEYBe.

Nonprofit health system Sutter Health during the last Medicare Annual Election Period launched several Medicare Advantage products with Orange, Calif.-based MA startup Alignment Healthcare, which as of June had enrolled about 7,000 members (RMA 6/18/20, p. 1). That partnership is just one part of Sutter’s overall strategy to grow its share of MA members, and the organization has spent the last four years cultivating an omnichannel approach that includes online aggregator eHealth, according to Alan Jones, executive director of Medicare sustainability for Sutter.

Speaking at a webinar hosted by World Congress, Jones explained that the health system consists of 24 hospitals and 5,500 providers in Northern California, a “polycentric economic region” with hotspots of economic activity around San Francisco that shape how Sutter is organized as a system. Sutter sees anywhere from 500,000 to 600,000 Medicare beneficiaries in a year (out of a total 2 million in the region) and has an “imperative mission to continue to support that population well into the future,” said Jones.

While second-quarter 2020 earnings calls centered largely on uncertainty related to the COVID-19 pandemic, insurers with a large Medicare Advantage presence expressed satisfaction in membership growth so far this year and confidence in their positioning for the 2021 Annual Election Period (AEP).

Reporting second quarter earnings on Aug. 5, Humana Inc. exceeded analysts’ expectations with adjusted earnings per share (EPS) of $12.56 and other metrics that it attributed to customers delaying care due to stay-at-home orders and pandemic-related concerns. That deferral of care was partially offset by costs related to COVID-19 testing and treatment in the quarter as well as the company’s pandemic relief efforts, explained Chief Financial Officer Brian Kane during an Aug. 5 call to discuss recent quarterly earnings.