While many observers are predicting the end of Medicare Advantage, enrollment in these private Medicare plans grew by 5.7% from 2009 to 2010. In March 2010, 11.1 million Medicare beneficiaries were enrolled in Medicare Advantage (MA) plans throughout the country, up from 10.5 million in March 2009 according to a report from the Kaiser Family Foundation.
According to the Kaiser report, a small number of companies dominate the Medicare Advantage market nationwide. One-third of all Medicare Advantage enrollees are in plans affiliated with two companies: UnitedHealthcare (18%) and Humana (15%).
HMOs account for a large share (69%) of UnitedHealthcare enrollees with the rest in local PPOs (6%) and regional PPOs (8%). Humana, relies much more on private-fee-for-service plans (28% of total enrollment) and regional and local PPOs (22% and 14% of enrollment, respectively) according to the report.
Definitions: An HMO (health maintenance organization) is a network plan where enrollees can only use contracted doctors, hospitals, labs and other providers. A PPO (preferred provider organization) is also a network plan, but allows enrollees to go “out-of-network” for a higher cost. PPOs do not require enrollees to get a referral from a primary physician as do most HMOs.
UnitedHealthcare is the largest firm in 13 states (Arizona being one) and among the top 3 firms in another 21 states and the District of Columbia. Humana is the largest firm in 18 states and among the top 3 firms in another 11 states. (In Arizona, Humana has been expanding its HMO and PPO plans to compete with United/Secure Horizons.)
Looking at the national market, the Kaiser report states that the average enrollee in an individual Medicare Advantage plan with Part D coverage (MA-PD) paid a premium of $44 per month in 2010, up 22 percent from $36 in 2009. HMO MA-PDs tend to have lower premiums ($37 on average) than local PPOs ($63). Note to Arizonans: we still have $0 premium MA-PDs in 2010.
The Kaiser report says that variations in premiums across different types of Medicare Advantage plans reflect strategic marketing decisions made by firms, such as whether to emphasize low premiums or extra benefits. Premiums also reflect the cost of care that varies greatly across the country. Note to Tucsonans: We are a lower-cost locale and this may be the reason we still have $0 premium plans.
The report says, “Low premiums appear to be more important in marketing UnitedHealthcare’s plans, where 80% of HMO enrollees, 81% of local PPO enrollees, and 97% of regional PPO enrollees are in zero premium plans”. Note to Arizonans: Secure Horizons, Evercare, and APIPA are UnitedHealthcare companies in Arizona.
The trend toward growth in Medicare Advantage enrollment continued in 2010 despite the drop in number of available Medicare Advantage plans and increases in premiums.
Enrollment in local and regional PPOs has increased. Although regional PPOs tend to have less comprehensive benefits than other plan types, they offer broad geographical coverage with relatively low premiums, which appears to have made them attractive to certain enrollees.
The Kaiser report noted a potential trend for Medicare Advantage:
Traditionally, Medicare Advantage has been most attractive to moderate income individuals who are less likely than higher income beneficiaries to have access to employer-sponsored retiree health benefits, and less likely than lower income beneficiaries to qualify for Medicaid. PPOs may be positioning themselves to compete for higher income beneficiaries, particularly as Medigap premiums increase and employer-sponsored retiree coverage erodes. To the extent that PPOs are beginning to compete for moderate to higher income beneficiaries, they may have greater flexibility than other Medicare Advantage plans to raise premiums to compensate for payment reductions in future years.
Note to Arizonans: We don’t have many PPO’s and they have gotten more expensive each year. Health Net discontinued its PPO in 2010 because the cost would have been unattractive to likely consumers. HMOs seem to be the trend in Arizona, so we’ll see if that changes in the future.
The Kaiser report finished up with the following:
The health reform legislation of 2010 made a number of changes to the Medicare Advantage program, including reductions in payments over time that are intended to bring average payments to plans closer to Medicare fee-for-service costs, reward high quality plans, and strengthen protections for beneficiaries enrolled in Medicare Advantage plans. Over time, these changes are expected to affect plan participation, enrollment, premiums and benefits. With dozens of Medicare Advantage plans available to beneficiaries throughout the country, and with payment changes phased in gradually, Medicare Advantage plans are likely to remain a key option for beneficiaries in the future. Still, changes in the Medicare Advantage marketplace could pose uncertainties for beneficiaries, similar to what occurred in the late 1990s following the Balanced Budget Act of 1997.
Note to Arizonans: In the late-90′s, several companies quit the Medicare HMO market and seniors had to enroll in other plans – but we still had private Medicare plans, which would be renamed “Medicare Advantage” and take off again in 2005-2006.