Centers for Medicare & Medicaid Services leaders point to seniors' wide array of Medicare Advantage and Part D choices as evidence of the program's and insurer's health, but regulators may soon be terminating dozens of plans, unless sponsors pull out first.
Just as the Medicare Advantage quality bonus demonstration is ending, at the end of 2014, CMS is going to start rejecting renewal of both MA and prescription drug plans that are rated with less than three stars for three consecutive years.
"CMS advises contracting organizations to examine their star rating performance history and assess their level of exposure to the risk of having CMS terminate their Medicare contract based on star ratings before the start of the 2015 contract year," regulators wrote in the 2015 MA and Part D final call letter. "It may be in the best interests of organizations and sponsors with "at risk" contracts to consider electing to non-renew those contracts."
How many plans this change will affect isn't clear, but a slight thinning of the Medicare Advantage herd is certain.
Rating the plans
In the 2014 coverage year, 25 percent of Medicare Advantage plans were rated with three stars and four percent were rated with less than 2.5 stars, according to an analysis by Health Pocket. Only three percent scored at five stars, 15 percent scored at 4.5 stars, 20 percent at four stars, and 33 percent at 3.5 stars.
Those four star plans attracted more than 40 percent of all MA-covered seniors this year, compared to just 28 percent in 2013, according to Health Pocket.
As for the two largest MA sponsors, UnitedHealth Group and Humana, only one may see some plans subject to nonrenewal, if 2014 ratings can carry the three year averages.
This year 40 percent of United's MA plans ranked at 3.5 stars, 39 percent ranked at three stars, 18 percent ranked at four stars, two percent ranked at 4.5 stars and 1 percent (just one plan) ranked at 2.5, according to Health Pocket. In 2014 Humana saw no plans rated below 3 stars: 50 percent were rated at 3.5 stars, 18 percent at four stars, 18 percent at 4.5 stars, and 14 percent at three stars.
Across all plan sponsors, for the four percent with 2.5 stars or less facing non-renewal, depending on their past history, CMS is offering a potential solution.
As an alternative, regulators wrote, "organizations and sponsors could explore whether it is allowable to consolidate membership currently enrolled in plans offered under low-performing contracts into other plans that will be offered during 2015 in the same service area under a different contract rated at three stars or better."
Still, that won't be possible for everyone.
"Dozens of plans are now dead men walking, including several of the publicly-traded Medicare plans and several Blue Cross/Blue Shield organizations," healthcare consultant John Gorman wrote. "So in a matter of weeks, a Hunger Games-style 'reaping' will occur that will change the face of this industry." Gorman estimates that eight MA plans have had less than three stars for three straight years, including four special needs plans.
MA still growing
Whatever the "face" of the Medicare Advantage industry, though, its customer base is still expanding, with a projected growth rate of around 10 percent through 2016. Amid the baby boom wave, in a few years Medicare Advantage could be covering one-third of all Medicare beneficiaries, or more.
Already, though, choices for seniors are beginning to narrow somewhat. For the current, 2014 coverage year, beneficiaries had an average selection of 18 plans to choose from, down from an average of 20 in 2013, according to an analysis by the Kaiser Family Foundation.
And adding to the pressure of rate reductions and low-star rated plan elimination, CMS is starting to try to limit network narrowing.
While CMS did not extend the 30-day minimum amount of time Medicare Advantage insurers need to follow to notify providers of termination, the agency is going to require insurers to notify regional CMS account managers of significant terminations at least 90 days ahead of time and, upon request, submit plans detailing how beneficiaries will locate new providers.
As a best practice, CMS is suggesting that MA plans making significant network changes should provide enrollees more than the required 30 days advance notice, and offer them information on in-network providers and instructions for requesting continuation of ongoing medical treatment or therapies with current providers. Regulators are also letting beneficiaries enroll in a new plan mid-year if one of their treating doctors or hospitals is removed from their plan's network.