Star
Tribune (Minneapolis, MN) June 30, 2019
Minnesota insurers that lost business with the dwindling of
Medicare Cost health plans this year were successful in boosting sales of
Medicare Supplement policies, regulatory filings show, although the increase
couldn’t completely offset the loss.
A Star Tribune analysis shows the three insurers
-- Blue Cross and Blue Shield of Minnesota, HealthPartners and
Medica -- collectively added about 111,000 customers buying Medicare Supplement
policies, which work in conjunction with the original Medicare program.
After factoring the simultaneous decline in Cost plan enrollment
as well as membership gains with a newer form of coverage called Medicare
Advantage, the three carriers in March were left with a smaller share of the
Medicare market than they held in December.
Even so, analysts said it’s notable how many people opted for
the supplemental policies, often called Medigap plans, since relatively few
seniors in a typical year jump from Medicare health plans back to the original
government program.
“The numbers are striking and much larger than we’ve observed in
the past at the national level,” said Gretchen Jacobson, an associate
director on Medicare issues at the California-based Kaiser Family
Foundation.
About 1 million Minnesotans get health insurance though the
federal Medicare program. Over the years, seniors here have opted to receive
their benefits through one of three primary channels -- Cost plans, Advantage
plans and the original Medicare program.
Across the country, a growing share of seniors have been
selecting Medicare Advantage, where government benefits are delivered through
private managed-care companies. Original Medicare remains the option for most
seniors, but there has been a shrinking market share for the program, where
many consumers buy Medigap policies to reduce their out-of-pockets costs.
Many health insurers sell both Medicare Advantage and Medigap
policies, but they are much more interested in selling Advantage plans,
said David Windley, an analyst who follows health insurers
for Jefferies LLC.
“The primary reason is that the premium per-member, per-month is
a lot higher in a Medicare Advantage product than in a Medigap,” Windley said.
“The second point would be, the ability to influence consumption is a lot
higher in Medicare Advantage.”
With Medigap coverage, he said, “the ability to have any
influence on reducing consumption in a way that would improve the margin in
that product is almost nil.”
Growth in Medicare Advantage has been harder to watch
in Minnesota due to the popularity here of a third option -- the
Medicare Cost plan. The coverage is like Medicare Advantage in being managed by
private insurers, but it is like original Medicare in offering a wider choice
of doctors and hospitals.
Last year, about 400,000 people in Minnesota were
enrolled in Medicare Cost plans. Those enrollees have been lumped together with
Advantage plan subscribers in national reports showing Minnesota over
the years as the state with the highest adoption rate for Medicare health plans.
For 2019, more than 300,000 people with Cost plans
in Minnesota had to switch coverage due to a federal law that put in
motion a long-delayed change in Medicare. To save money, the federal government
more than a decade ago decided that Cost plans would be shut down in counties
where there’s significant competition from Medicare Advantage carriers.
Of those who had to make a change in Minnesota, roughly
200,000 wound up in Medicare Advantage plans. Others went with original
Medicare and, in many cases, bought Medigap supplements.
“The market for Medicare plans is today a smaller market than it
was a year ago,” said Allan Baumgarten, an independent health care analyst
in St. Louis Park. “It makes Minnesota look more like other
states.”
Cost plans in Minnesota were eliminated this year
across 66 counties including much of the Twin Cities metro. They
remain in 21 counties including the northeast corner of the state. Over the
years, the coverage has been “a very profitable line of business” for health
insurers, Baumgarten said.
Eagan-based Blue Cross saw its enrollment in Medicare
Supplement policies more than double, to about 170,000 by the end of March. The
insurer’s enrollment in Cost and Advantage plans, meanwhile, dropped by nearly
half between December and March to about 131,000 people.
Put the numbers together and Blue Cross, the state’s
largest nonprofit health insurer, saw its Medicare market share drop by more
than 39,000 people, about 12%.
Over the past five years, Medicare health plans were the single-largest
source of operating income at Blue Cross, according to a Star
Tribune analysis of regulatory filings. From 2014 to 2018, Blue
Cross posted operating income of $276.8 million on the Medicare
health plan business.
To adapt to the Medicare shift, Blue Cross said it was
focused on running the Medicare business it retained plus diversification
efforts within its parent company. Last week, Blue Cross announced a
joint venture with Robbinsdale-based North Memorial Health that
includes an ownership stake in a network of clinics.
Last year, Minnetonka-based Medica ran the state’s
second-largest Medicare Cost plan, behind Blue Cross. The Star
Tribune review shows Medica’s overall Medicare enrollment dropped about
19%, or about 29,000 people. Declines in Cost plan enrollment were offset to a
degree by gains in both Medigap and Medicare Advantage enrollment.
Medigap policies and Advantage plans represent new lines of
business for Medica, said Tom Lindquist, a senior vice president with the
health insurer. As was true for Blue Cross, Medicare Cost plans have been
a profitable line of business for Medica.
Insurers see more revenue per enrollee with Medicare Advantage
because they are responsible for covering both outpatient benefits (Medicare
Part B) as well as hospital services (Part A), Lindquist said, whereas Cost
plans aren’t the primary payer for Part A benefits. The increased
responsibility means insurers must work closely with health care providers to
manage care, Lindquist said. That includes making sure patient health
conditions are properly documented, he said.
Medicare Advantage plans receive payments on a per-member,
per-month basis from the government, and those payments can be adjusted upward
for patients with more health problems.
“You want to make sure the senior that you’re treating is
identified with all the conditions they have, so that you’re paid the
appropriate revenue from [the federal government],” Lindquist said.
On the Medigap side, insurers collect much less per capita
premium revenue, Lindquist said, but they are spared the work of determining
whether claims from doctors and hospitals are eligible for payment. That work
is done by the federal government. Medigap insurers, however, make assessments
about the risk of potential enrollees.
Whether it’s Medigap, a Cost plan or an Advantage plan, “each
one requires you to do something a little bit differently in order to be
successful with it,” Lindquist said. “The revenue changes, but what you have to
do with each product changes, too.”
Medica is adapting to the Cost plan shift not only by offering
the Medicare alternatives, but also by growing its business in states
outside Minnesota including individual market offerings across the Midwest.
Bloomington-based HealthPartners saw its overall
Medicare enrollment drop by about 13,000 people, or 21%, from December to
March.
“We see this evolution in Medicare as a multiyear process,” the
insurer said in a statement. “We’re also growing our health plan into new
markets including Iowa, Illinois, North and South
Dakota and Wisconsin, offering both commercial and Medicare plans in
these markets.”
If the insurers that sold Cost plans lost business, where did
enrollees go?
Minnetonka-based UnitedHealthcare and a joint venture involving
the national carrier Aetna both picked up membership.
Minneapolis-based UCare, which doesn’t sell Medigap or Cost
plans, saw its Medicare Advantage enrollment grow by about 21,000 to about
103,000. Kentucky-based Humana saw Medicare Advantage growth
in Minnesota of 58,000, said Baumgarten.
He said the growth at Humana and UCare was “impressive.”
Christopher
Snowbeck • 612-673-4744
Twitter:
@chrissnowbeck
___
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