Many people (myself included) have predicted the demise of Medicare Advantage.  The Health Care Reform law created a number of new rules for insurance companies that run these plans and profit from the billions of dollars they receive from the Medicare Trust Fund.

Starting in 2011, every Medicare Advantage plan must cap enrollees’ out-of-pocket expenses. This means a person treated for cancer won’t run up bills that can total $10,000 or more.

Beginning in 2014, profit margins for Medicare Advantage plans will be capped as they will be required to spend 85% of their revenue on their enrollees.  Most Advantage plans already meet this requirement, but some plans have spent as little as 70% of revenue on their enrollees.

If you think these tough rules (and increased oversight) signal the end of Medicare Advantage, you would be wrong.  In both Tucson and Phoenix new Medicare Advantage plans are coming to these markets.

SCAN (Senior Care Action Network) has nearly 8,000 enrollees in Maricopa county after just two years there.  SCAN will begin marketing its plan in Tucson later this year.

Caremore was new to the Tucson market in 2010 and will be expanding to Phoenix for 2011. Both SCAN and Caremore are $0 premium Medicare Advantage plans which include Part D.

With millions of baby boomers turning 65 each year, insurance companies have determined that the growing Medicare market is good for their bottom line.

The Associated Press, reporting on Humana’s strong business performance in 2010, said “its lucrative Medicare Advantage business posted double-digit enrollment growth”.

Reuters reported that UnitedHealth Group posted a higher-than-expected second-quarter profit, “helped by growth in its Medicare Advantage plans for elderly and low-income Americans”.

Reuters reported that WellPoint (which owns many Blue Cross Blue Shield companies across the country) “wants to expand its Medicare business to take advantage of the post-war baby boom generation”.

Humana’s CEO recently told industry analysts that Medicare Advantage remains a “tremendous opportunity” and acknowledged that he’s been surprised that more competitors haven’t ventured into the market.

It looks like there will be more competitors getting into the Medicare Advantage market and that means more options for seniors in Tucson and Phoenix.