Radar on Medicare Advantage

After a handful of publicly traded insurers last month reported second-quarter 2023 earnings that reflected the impact of increasing utilization, additional insurers reporting results in August said they witnessed a similar phenomenon, particularly among the Medicare Advantage population. But the insurers indicated that they were able to factor those trends into their bids for the coming plan year, while analysts were reassured that the issue was largely confined to MA and not the commercial sector.

UnitedHealth Group first disclosed the uptick in outpatient care utilization in June, sparking an insurer-stock selloff. Shortly after, Humana Inc. revealed in an 8-K filing with the U.S. Securities and Exchange Commission that it was also seeing elevated medical costs due to an increased use of services. Humana in that filing projected its insurance medical loss ratio (MLR) for the full year would settle in the higher (worse) end of its previously stated 86.3% to 87.3% range. “This expectation is primarily driven by the emergence of higher than anticipated non-inpatient utilization trends, predominantly in the categories of emergency room, outpatient surgeries, and dental services, as well as inpatient trends that have been stronger than anticipated in recent weeks, diverging from historical seasonality patterns,” the MA-focused insurer stated. The company also explained that it was seeing strong growth in its MA membership, including a “higher-than-expected proportion of age-ins” during the three-month Open Enrollment Period that ran from January to March, and such members tend to have an above-average MLR when compared to more established customers.

In its annual release of the Medicare Part D bid information for the coming plan year, CMS on July 31 projected that the average total monthly Part D premium will decrease from $56.49 in 2023 to $55.50 in 2024, thanks in large part to the basic part of the premium being held down by a stabilization provision in the Inflation Reduction Act (IRA). But unlike previous years, where the national average monthly bid amount (i.e., the weighted average of the estimated cost to Part D plan sponsors of providing their benefit package) steadily dropped, CMS reported that the bid amount will rise from $34.71 for 2023 to $64.28 in 2024. That’s largely because of IRA-mandated changes and CMS’s recent rulemaking on pharmacy price concessions.

Starting in 2024, the IRA limits the annual increase in the base beneficiary premium to no more than 6%. The base beneficiary premium, which is the starting point for calculating a plan-specific basic Part D premium, is projected to rise by 5.9% to $34.70 in 2024.

Provider groups that want to sponsor a Medicare Advantage plan have multiple avenues of entering the market and competing with large national players — including building a plan from scratch. But funding, state licensure and other regulatory requirements are key considerations before taking the leap, according to experts who spoke during a recent webinar hosted by Manatt Health.

“There are a lot of players in the market, and a lot of providers are trying to figure out if this is a good strategy for them,” said Paul Carr-Rollitt, partner with Manatt Health, during the July 20 webinar, Creating Provider-Sponsored Medicare Advantage Plans: Opportunities, Risks and Keys to Success.

As the MA market expands, there is increasing interest among provider-based groups — from hospitals, health systems and physician associations — to make an entrance. While the market is currently “dominated by a few key players” and considered “highly concentrated,” that doesn’t mean provider-sponsored groups that are intrigued by the idea must be forced to the sidelines, Carr-Rollitt said.