By John Tozzi and Scott Moritz October 16, 2019, 2:03 PM
CDT Updated on October 16, 2019, 2:49 PM CDT
UnitedHealth Group Inc. will
lose two large customers in its retiree health-care business next year, a
setback for the insurer in an increasingly competitive marketplace for senior
medical benefits.
Verizon Communications Inc. will no longer offer UnitedHealth
plans to retired workers in its western region starting in 2020, according to
people familiar with the matter. A state-sponsored plan for some retired
Alabama public employees also will drop the insurer’s coverage, according to
information posted on an Alabama government website.
Many large employers have historically offered health benefits to
retirees, including private coverage before they turn 65, and add-on benefits
once they become eligible for Medicare, such as help with out-of-pocket costs.
As companies try to limit retirement expenses, they’ve shifted former workers
into private Medicare plans, an attractive business for insurers who can pick
up lots of new members.
Verizon will stick with UnitedHealth for retiree benefits in its
eastern region, one of the people said, but the account for its western region
will go to CVS Health Corp.’s Aetna division. The change was made to get more
competitive bids from vendors, the person said.
UnitedHealth will retain the majority of New York-based Verizon’s
retirees, according to a person familiar with the situation. UnitedHealth
serves more than 1.4 million retirees in its group Medicare Advantage business
for about 500 clients, the person said.
The Alabama Public Education Employees Health Insurance Plan is
shifting retirees to Humana Inc. Medicare Advantage plans, according to documents posted
online.
Verizon “moved a large cohort of retirees -- not the entire
portfolio” to Aetna’s group Medicare Advantage plan effective January 1, said
T.J. Crawford, a spokesman for CVS’s Aetna unit, in an email. A representative
for Humana didn’t respond to requests for comment.
Retirement Plans
The defectors were high-profile parts of UnitedHealth’s group
retirement business, one of the people said.
There were more almost 87,000 retirees and spouses receiving
benefits through the Alabama plan as of Sept. 30, 2017, according to the
system’s website. Not all of them may have been on the
UnitedHealth Medicare Advantage plan, as some retirees may not be eligible.
Verizon has a total of 200,000 retirees, according to an estimate
by Jack Cohen, chairman of the Association of BellTel Retirees Inc.
UnitedHealth covers 5.23 million people through Medicare
Advantage, including people who purchase the coverage individually. Humana and
Aetna are also big players, and other insurers who haven’t had as large a slice
of the market in the past are increasingly targeting it for growth.
On Tuesday, UnitedHealth beat analysts’ forecasts and raised its
earnings guidance for 2019, results that sent its shares surging more than 8%.
Executives said the market for its commercial health plans for workers was also
competitive.
“As we look into 2020, we had a few national account losses,” Dirk
McMahon, head of the company’s insurance unit, UnitedHealthcare, said on a
conference call after the results were released.
McMahon said the insurer has had to defend more accounts than in
prior years, but that the account departures wouldn’t have a material impact.
(Updates with comment from CVS Health’s Aetna unit in seventh
paragraph)
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