Avalere Analysis Reveals First Drop In Medicare Advantage Offerings Since 2011

September 23, 2013

Medicare Advantage HMO offerings grow while PPO and PFFS offerings are exiting the market. Analysis also shows significant variation in PDP premiums in 2014; five out of top 10 prescription drug plans have double digit increase

According to a new Avalere analysis of the Centers for Medicare & Medicaid Services (CMS) Landscape Files for 2014, participation by Medicare Advantage (MA) plans will dip modestly in 2014 amid continued payment reductions enacted under the Affordable Care Act (ACA). The total number of MA plans will decline from 2,664 in 2013 to 2,522 in 2014—a 5.3 percent decrease.


A majority of the counties across the country will see a decrease in the number of MA plans available from 2013 to 2014. Approximately 80 percent of counties in the South and Midwest will see a reduction in MA plan options, while slightly more than half of the counties in the Northeast and West will have fewer plan options. 



“The multitude of payment changes for MA plans under the ACA are taking root and starting to broadly impact the number and types of plans available in the market,” said Matt Eyles, executive vice president of Avalere Health. Avalere concludes that a number of factors are driving the decline in MA participation, including the continued 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; and application of the new health insurer fee. 



For 2014, plan sponsors are responding by reducing their footprint in rural markets and relying on more highly managed plan products, such as Health Maintenance Organizations (HMOs). Overall, HMO offerings will grow while Preferred Provider Organization (PPO) offerings will decline. Local and regional PPOs will decline 16.6 percent from 709 in 2013 to 591 in 2014, but HMOs will increase by 2.6 percent from 1,675 in 2013 to 1,718 in 2014.



Finally, the Avalere analysis found that the number of Special Needs Plans (SNPs) will decrease from 625 in 2013 to 544 in 2014—a 13 percent overall drop, with the number of chronic condition SNPs (C-SNPs) declining 30 percent. UnitedHealth is driving the decline in C-SNPs, as the sponsor will withdraw 65 C-SNPs from the market. Notably, UnitedHealth had introduced 46 new C-SNPs just last year. 



Avalere’s examination of Part D standalone prescription drug plans (PDPs) reveals that premium changes among the top 10 PDPs vary widely, with half of the top 10 plans instituting a double digit percent increase from 2013-2014. AARP MedicareRx Saver Plus (sponsored by UnitedHealth) had the lowest 2013 premiums in 2013 but has been approved by CMS for 2014 with the highest percentage increase with premiums rising 55 percent from $15.00 to $23.22. In contrast, premiums for WellCare Classic will decline sharply in 2014, by 38 percent from $33.54 to $20.72. WellCare’s introduction of a preferred pharmacy network has allowed it to achieve a more competitive price. 



On average, PDP premiums will increase by 5.1 percent overall. 



“When seniors choose a prescription drug plan for 2014, they should carefully look at their options to select the plan that best meets their health and financial needs,” said Eyles. “There are a lot of changes in monthly premiums, cost-sharing, and plan features. The percentage increases in premiums for some of the top plans are larger than we have seen in recent years. However, there are still many low premium plan options, so seniors should shop around to get the best value.”   



Avalere’s new analysis also found that top Part D sponsors such as UnitedHealth, Humana and Aetna will continue to use preferred pharmacy networks to attract cost-conscious enrollees. Preferred pharmacy network plans typically offer lower cost-sharing to beneficiaries when they fill their prescriptions at certain pharmacies. Humana Walmart, the sponsor’s new enhanced plan, will have the market’s lowest monthly premium at $12.60. Such low-cost PDPs have successfully gained market share over the past two years, and Avalere experts anticipate that this trend will continue into 2014.



Methodology



Avalere Health analyzed the MA, SNP, and Part D landscape files released by CMS. For the 2014 PDP file, several plans are under enrollment sanctions and excluded from the landscape files: SilverScript Basic, SilverScript Choice, and SilverScript Plus, SmartD Rx Saver, and SmartD Rx Plus. Without premium or benefit design data for these plans, Avalere made several assumptions when conducting the analysis.





  1. Avalere estimated 2014 premiums for these five PDPs by applying the percentage change in premiums from 2013 to 2014 for the entire PDP market to the 2013 premiums for the five plans. 






























































  2. While we used the estimated 2014 premiums for these five PDPs to calculate market-wide trends, we will not report premiums for any of these plans.















  3. For other benefit design information, such as deductible and gap coverage, Avalere assumed that the benefit design features for 2014 remain the same as in 2013.