Medicare Advantage Cuts

The insurance industry launched a second television ad Monday against proposed cuts to private Medicare Advantage plans.

The latest ad features seniors talking into the camera about the “drastic” consequences of losing access to their Medicare Advantage plans. 

“If Medicare Advantage has some cuts to it, I’m going to be in bad shape financially,” one man says in the new ad, which began airing in Washington, D.C. on Monday and will air in Louisiana on Tuesday.

It’s the second television ad America’s Health Insurance Plans (AHIP) has launched in a far-reaching lobbying campaign to block the proposed cuts. More than 100 members of Congress, representing both parties, have also written letters to the Medicare agency protesting the proposed cuts.

The agency recently proposed a 2.2 percent cut in payments to Medicare Advantage — Medicare plans administered by private insurance companies.

The 2 percent cut would come on top of reductions included in President Obama’s healthcare law. All told, according to AHIP, plans would have to find benefit cuts or premium increases worth $50 to $90 per customer if the cuts go through.

The Hill

Obamacare Medicare Advantage Cuts

Medicare Advantage cutsUS federal ( Obamacare ) rules requiring health insurers to spend 80%-85% of their revenues on clinical services and other benefits are to be extended to Medicare Advantage and prescription drug plans, which will be required to spend “at least” 85% of their revenues on clinical services including prescription drugs.

The change, to be introduced next January, is included in a proposed rule which extends the 2010 Affordable Care Act (ACA)’s medical loss ratio (MLR) requirements, which limit how much insurance plans can spend on marketing, overheads and profit, to Medicare Advantage and Medicare Prescription Drug plans.

Similar MLR requirements are already benefitting consumers in the private health insurance market, says the Centers for Medicare and Medicaid Services (CMS), which has sent the proposed rule to the White House Office of Information and Regulatory Affairs (OIRA).

“We are working to ensure that people with Medicare have affordable access to health and drug plans, while making certain that plans are providing value to Medicare and taxpayers,” said Jonathan Blum, acting principal deputy administrator at the CMS and director of the agency’s Center for Medicare.

The MLR rules note that many insurance companies spend “a substantial portion of consumers’ premium dollars on administrative costs and profits, including executive salaries, overhead and marketing.” The ACA requires health insurers to submit data on the proportion of premium revenues spent on clinical services and quality improvement (which constitute MLR), and to issue rebates to enrolees if their spending on these benefits does not meet the minimum percentages.

The proposed new rule will require Medicare Advantage and Medicare Prescription Drug plans to meet a minimum MLR from the start of next year. “Plans must spend at least 85% of revenue on clinical services, prescription drugs, quality improvements, and or/direct benefits to beneficiaries in the form of reduced Medicare premiums. Enrolled seniors and individuals with disabilities will get more value and better benefits as plans spend more on health care,” says CMS.

Failure to meet these percentage requirements for five consecutive years would lead to a plan’s removal from Medicare Advantage, reports Washington newspaper The Hill, which points to the proposal’s significant financial importance, as it is estimated to carry an economic impact of more than $100 million. However, it is not yet clear what will be defined as “quality care” and what will fall into “expenses and overhead,” and this is very important, it says, quoting healthcare lawyer Bobby Guy, who suggests that how the prescription drug plans deal with the new caps could serve as a model for the rest of the health insurance industry.

– The initial MLR rule, first introduced in 2011, was a factor in the compression seen in health insurers’ margins last year, according to a new report from ratings agency A M Best. The majority of health insurers have positioned themselves to implement strategies that will allow them to adapt to the new operating environment created by the ACA and to maintain profitability, says the firm, although it “has concerns” about the profitability of smaller, more specialised companies, particularly over the near to medium term, given the Obamacare  minimum MLR requirements.


Medicare Advantage Piedmont-Wellstar Insurance Plan

Medicare Advantage plans coming soon from Piedmont

Piedmont Healthcare and WellStar Health System, two powerful medical organizations, are moving into a new realm: health insurance.

The hospital systems intend to create a health plan that will offer Medicare Advantage and commercial insurance in 2014, as well as serving the two organizations’ employee base that, with their families, exceeds 35,000.

The insurance plan follows the announcement last month that Piedmont and WellStar had formed a collaboration to develop health care delivery models.

Piedmont and WellStar combine 2,393 hospital beds, 10 hospitals, seven urgent care centers and more than 700 physicians.

WellStar dominates the suburbs west and northwest of Atlanta, while Piedmont has extensive operations south of the city, along with its prestigious hospital in Atlanta’s affluent Buckhead district.

The Wall Street Journal reported that in recent months, Northern California’s Sutter Health and New York’s North Shore-Long Island Jewish Health System have said they would start selling health plans. A 2011 survey of 100 hospital leaders by health research firm Advisory Board Co. found that 20 percent of them intended to market an insurance plan.

Some systems with limited insurance operations are expanding, including MedStar Health in the Baltimore-Washington area, which will add Medicare plans next year and is likely to have a plan on the Maryland health exchange, the Journal article said.

Driving the trend is the pressure to reduce costs, as well as the revolutionary changes set in motion by the Affordable Care Act.

A leader of a health insurance trade group in Georgia told GHN on Monday that Piedmont/WellStar will be an interesting partnership to watch.

Graham Thompson, executive director of the Georgia Association of Health Plans, noted that a previous insurance offering by another local hospital system organization, Promina, failed to gain a strong foothold a decade ago.

“They weren’t so adept at the back office’’ functions, he said.

It may be difficult for Piedmont and WellStar to cover the whole metro Atlanta area, Thompson said, noting that large employers have workers all over the region.

And he questioned whether Piedmont’s and WellStar’s relationships with traditional insurers will change by their becoming a health plan competitor.

Some hospital organizations, including the University of Pittsburgh Medical Center and Intermountain Healthcare in Utah, long have had health plans, the Journal article noted. Others, including some health systems considering them now, have tried and failed with them in the past.

The failures, the Journal reported, reflect in part the difficulties of reconciling conflicting interests: Hospitals typically make money when they fill their beds with patients, and health plans pay the bills for those admissions.

Piedmont said Monday in a press release that it began developing a health system-based health insurance plan in July when it partnered with Evolent Health, created in part by the University of Pittsburgh Medical Center. The Pittsburgh organization has one of the country’s most successful health system-based health plans, the news release said.

”We believe our industry’s future relies on successfully implementing a population health model of care – delivering disease prevention and care management with higher quality at lower costs,” said Gregory Hurst, president and interim chief operating officer at Piedmont. “Launching a health plan helps us move more quickly toward that future, and we consider this yet another area where we can demonstrate vision and leadership in Georgia’s healthcare industry.”

Reynold Jennings, president and CEO of WellStar, added that Piedmont and WellStar “are uniquely positioned to work together to achieve improved clinical results and reduction in costs” as called for in the Affordable Care Act. “Health systems that have a broader geographic reach and larger population base will be best suited to react to and sustain operations regardless of future federal and state legislative outcomes.”

Dr. Ronnie Brownsworth of Piedmont, a neurologist, will be CEO of the newly formed health plan.

“This health plan will keep patients and physicians at the center of our care model with the ultimate goal of improved health in our patient populations,” said Brownsworth in the press release. “We also look forward to continuing our work with other insurance plans in finding ways to deliver the best results for our patients.”

David Smith, a consultant with Kearny Street Consulting, told GHN on Monday that it’s a tough time to enter the health insurance business.

“Even the big guys [insurers] are having a very hard time figuring out what lies ahead with Obamacare,’’ Smith said.

The big unknown, he said, is how to price coverage under the health reform law’s new requirements.

“It’s going to be a new day in insurance,’’ Smith said. “To enter the market right now is a little scary.’’

Piedmont-WellStar alliance to launch health plan