The Centers for Medicare and Medicaid Services has proposed, in its new Medicare Advantage rate notice, to waive the bidding requirement for employers and union groups that offer retirement plans to their employees.
The Centers for Medicare and Medicaid Services has proposed, in its new Medicare Advantage rate notice, to waive the bidding requirement for employers and union groups that offer retirement plans to their employees.
CMS instead wants to establish set payment amounts, indicating the bid process lacks competition, and therefore, price incentives.
Medicare Advantage plans that exclusively serve employer and union groups do not compete in the open market, but are offered through negotiated arrangements, CMS said.
The change is expected to cut into profits for these plans, as the bids are generally higher than those in the individual market.
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"We believe there is an incentive for EGWPs (Employer Group Waiver Plans) to bid as close as possible to the benchmark in order to maximize revenue for the plan," CMS said.
The move has also been recommended by the Medicare Payment Advisory Commission, which found average bids for non-employer plans at 86 percent of their benchmark, while employer union plans averaged 95 percent.
In 2015, MedPAC found that the average bid for the employer/union plans was 105 percent of the fee-for-service rate, whereas the average bid for all Medicare Advantage plans was 94 percent of the fee-for-service rate, CMS said.
MedPAC said in a March 2009 Report to Congress, "The closer the bid is to the benchmark the better it is for the plans and employer, because a higher bid brings in more revenue from Medicare, potentially offsetting expenses that would have required a higher pay-in from employers," CMS said.
Bids for the employer and union plans should be lower than individual plans because the risk scores are lower for the healthier population, and there's less administrative cost related to enrollment and marketing, CMS said.
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CMS said it believes that waiving the requirement to submit the bids for their Medicare eligible retirees will avoid the cost and administrative burden of submitting complex bids.
As of 2015, about three million beneficiaries, or approximately 19 percent of all Medicare Advantage beneficiaries, were enrolled in an employer/union plan, said CMS, which first expressed concern for the bid process in 2012.
"(These) bids are higher with no apparent rationale or explanation for the higher costs," CMS said.
CMS warned that these plans must continue to meet requirements, saying it recognized that reduced payments could lead to higher premiums for current levels of supplemental coverage or that employers would choose to reduce the supplemental coverage provided to employees.
America's Health Insurance Plans has been lobbying against the new payment policies, saying it wants to protect coverage for 17 million Medicare Advantage beneficiaries. One implied risk is of three million Medicare Advantage enrollees losing coverage through their employers and unions.
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Ahead of the final rule of the Medicare Advantage payments on April 4, a grassroots Coalition for Medicare Choices has been mobilizing senior citizens to man phone banks, attend in-district Congressional meetings, and lead voter registration activities, AHIP said. There will be TV ads, calls to congressional offices, and visits with elected representatives during the week of March 21, it said.
Seniors will see the impact of new payment changes in late October 2016, when they begin enrolling in their 2017 Medicare Advantage coverage, AHIP said.
Twitter: @SusanJMorse