The Changing Landscape of Medicare Advantage Plans in 2014

By Holly Cassano, CPC, CEO ACCUCODE Consulting LLC, in partners with Tactical Management Inc., (TMI)

Medicare Advantage Plans have existed now for nearly a decade and since their inception in 2006, when they covered approximately 8 Million lives, they have grown to about eight times that size, as of 2013, to approximately 46 Million lives.

How Medicare Advantage Works

CMS pays the Medicare Advantage (MA) Plans, a fixed amount monthly, in order for the Plans to provide benefits to members. Additionally, there are several MA Plans, that also charge an additional monthly premium, in order to provide these services to Plan members.

The responsibilities of an MA Plan include providing ALL Part A and Part B coverage to a member, at minimum. Additionally, an MA Plan may offer bonus coverage, that includes the following benefits for an additional cost:

• Vision
• Hearing
• Dental
• Health and/or wellness programs
• Medicare prescription drug coverage (Part D) (Generally included in coverage, but doesn’t have to be)

Financial Pressures on the Rise for MA Plans in 2014

Last September 19, 2013 the Centers for Medicare & Medicaid Services (CMS) released its annual Landscape Files for 2014. These files contain data on MA Plan participation, premiums and benefit prospectus for Medicare Part D (Prescription Drug) and the Medicare Advantage (MA) markets for 2014.

The Landscape files for 2014 reflected an expected shift for MA plans, which are facing increased financial pressures, which includes the Affordable Care Act (ACA), health insurer fees and recent changes that affect the Risk Adjustment Model. One of the most notable changes for 2014, are the new payment cuts that will negatively impact MA Special Needs Plans (SNPs), that serve many members who suffer from severe Chronic Conditions and have other related healthcare requirements to maintain care.

The Landscape files indicated that in addition to the payment cuts to SNPs, the number of SNPs available will decrease from 625 in 2013 to 544 in 2014, that is over a 13% decrease in available SNPs for 2014. Additionally, there is an approximate 30% decline in the number of chronic condition SNPs (C-SNPs). No surprise here, that UnitedHealth is the driving force in this rapid decline of viable C-SNPs. United Healthcare will lead the pack as it withdraws roughly 65 C-SNPs from the market, after introducing about 46 new C-SNPs in 2013 – they giveth and taketh away.

MA HMO products still continue to grow, despite the quick retreats of both the PPO and PFFS products from the current market. A closer look revealed that due to overall significant variations in PDP Premiums for 2014; approximately 5 out of the top 10 PDP plans show double digit increases.
CMS indicates that the data from the 2014 Landscape Files, reflect that overall participation from MA plans will slightly dip, due to a furtherance of reduced payments on the heels of ACA. In total, MA plans will drop by about 5.3%, going from 2,664 in 2013 to 2,522 in 2014.

Similarly, there will be a significant number of counties across the US that will be impacted by a decrease in the number of MA plans in 2014. Counties across the South and Midwest will be impacted the most, with an approximate 80 percent reduction in MA Plan offerings, while the Northeast and West, will fare slightly better, with an overall reduction of MA Plan offerings of about 50 percent.

With the rapidly changing landscape of payment changes targeting MA plans for 2014 with the ACA, it is no wonder that we are seeing MA Plans leaving the market or dramatically changing the types of plans they offer for 2014. Notably, some of the key factors that are pushing the rapid decline in MA Plan participation include the following:

• Phase-In Of Payment Cuts Enacted Under The ACA
• Modifications To The CMS Risk Adjustment Model
• Implementation Of New Medical Loss Ratio Requirements For MA Plans
• Application Of The New Health Insurer Fee

2014 MA Plan Rural Market Penetration or Should We Say – Reduction?

The 2014 MA landscape is also changing significantly in the rural markets. Plan sponsors are rapidly eliminating product offerings in the rural markets and letting their managed plan products, the HMOs, drive penetration and eliminate their former PPO offerings. Avaliere Health, put the analysis to paper in the chart below, which reflects a drop in PPO Plans to the tune of about 17 percent. PPO offerings will drop from 709 in 2013 to 591 in 2014, while the HMO products will see an overall increase of close to 3 percent, rising from 1,675 offered in 2013 to 1,718 for 2014.


United Healthcare Continues to Buck the System:

Last week, on January 2, UnitedHealthcare succeeded in acquiring a few more oponents to its recent slaight of MA provider network cuts – the state of Connecticut and U.S. Sen. Richard Blumenthal (D). Both the state of Connecticut and Senator Blumenthal (D), filed briefs which supported the previous injunction from a federal judge, in an attempt to block the Insurance giant from dropping thousands of MA providers on February 1, of this year, as reported by the Hartford Courant.

Some of the reasons cited for the support to block UnitedHealthcare from this action were as follows:

• Continuity of Care beng disrupted
•  Potential Medical Errors
•  Potentially negative and harmful effects on UH patients
•  Increase premiums to obtain coverage under new plans

The Courant also quoted Senator Blumenthal with the following “Connecticut patients will immediately face the Hobson’s choice of having to give up their current physicians, thereby risking medical errors arising from lack of continuity of care, or paying much higher rates to retain their current physicians.”

UnitedHealthcare remained undeterred from these recent oppositions to its intended action on February 1 and is moving full steam ahead wth its plans to dramatically decrease participating providers in the current network and appealed the decision. The CT News Junkie reported “that there will be a hearing on UH’s appeal later this month” and “UnitedHealthcare maintains that the provider cuts will promote high quality, affordable MA coverage.”

Karen Ignagni, President and CEO of America’s Health Insurance Plans (AHIP), stated previously, that “harmful” federal funding cuts to Medicare Advantage plans are phased in over the next few years and as the Quality Bonus Demonstration program expires at the end of 2014, Medicare Advantage beneficiaries will experience even higher costs, reduced benefits, and fewer health care choices,”

Notably, the AHIP sent a letter with a much different sentiment on this topic to Marilyn Tavener, Administrator for The Centers for Medicare & Medicaid Services, which stated that “Medicare Advantage network cuts are among payer efforts to offset $200 million in less funding over the next 10 years.”

To read more: Medicare Advantage network cuts pit UnitedHealth against Connecticut officials – FierceHealthPayer

Stargazing for 2015

On October 15, 2013, The Centers for Medicare and Medicaid Services (CMS) posted the annual Star Ratings for 2014 Medicare Advantage (MA) and Part D plans on the website. Looking ahead to 2015, MA plans that no longer receive quality bonuses may reduce additional benefits, increase premiums and possibly exit some markets.

Now that quality is finally being enforced as a financial component for MA plans for 2014, plans with a with Star Ratings of at least 3 stars (average) or 3.5 stars, which is the current national average for the majority of MA Plans, will continue to receive quality bonus payments, but the game will change significantly in 2015. 2015 will determine the winners and losers of MA Plans, as only those plans with a Star Rating of 4 stars (above average), or 5 stars (excellent), will continue to receive those sought after quality bonus payments from CMS.
CMS realizes that MA plans are keen on their Star Ratings, due to the potential financial windfall they can receive annually based on those ratings. 2015 may indeed prove to be a lean year for many MA plans who remain in the market and they will have to look inwardly to operations in order to improve and achieve that 4 or 5 Star Rating. The CMS Star Ratings program measures a plans ability to deliver quality care to members overall throughout a benefit year for both MA and Part D Plans. The CMS scale is from 1-5 Stars, with 1 being the lowest rating possible.

With ACA in place for 2014, payments to MA plans are directly linked to how the plan performs, as indicated by its Star Rating for the benefit year. Plans with higher Star Ratings are afforded a greater share of federal payments, which allows the Plan to offer additional and better benefits above general offerings and allows the Plan to potentially offer lower premiums to members.

The HAUTE HCC Free Zone:

• The HHS risk adjustment methodology is described in the HHS Notice of Benefit and Payment Parameters for 2014, Final Rule (CMS-9964-F), which was published in the Federal Register on March 11, 2013 – to view the changes and updates, please click on the following Link:

•  Medicare risk adjustment information, including: Evaluation of the CMS-HCC Risk Adjustment Model, Model diagnosis codes, Risk Adjustment model software (HCC, RxHCC, ESRD) and Information on customer support for risk adjustment. For more information, please click on the following link:

Don’t Leave Those HCC’s on the Table!

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•  Centers for Medicare & Medicaid Services (CMS) Landscape Files for 2014:


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