Commencement of Medicare Advantage open enrollment brings forth shifts in policies
Despite the market expansion, insurers are causing a stir with numerous changes that might force some elderly individuals to look for new policies, pay more out-of-pocket, or settle for less in supplemental benefits.
As reported by Lindsay Knable, a partner at Oliver Wyman's health and life sciences practice, this current benefit disruption is the most dramatic we've witnessed in the market.
Medicare Advantage enrollment is expected to reach 35.7 million, or 51% of total Medicare enrollment. Through the Medicare Advantage program, which functions as an alternative to traditional Medicare, the federal government enters into contracts with private insurers to offer Medicare coverage to beneficiaries, many of whom are budget-conscious since they live on fixed incomes.
However, few enrollees actively participate during open enrollment, which lasts until December 7. According to KFF, a health policy research organization, nearly two-thirds of Medicare Advantage participants did not assess their coverage against alternative options for 2022.
Enrollees should diligently examine their annual notice of change to discover what changes might occur in 2025, Jeannie Fuglesten Biniek, an associate director of KFF’s Program on Medicare Policy, advised.
Discontinued policies
Over 1.8 million Medicare Advantage members, around 8% of those in non-group, non-special needs plans, are enrolled in policies that will not be available in 2025, according to Oliver Wyman's analysis. Approximately 1.3 million of them currently enjoy $0 premium plans.
Those affected will have to actively select new policies or switch to traditional Medicare. In comparison, fewer than 230,000 members, or about 1%, found themselves in this situation for 2024.
Humana and Aetna lead in trimming their offerings, affecting around 10% of their membership, David Windley, senior equity analyst at Jefferies, noted. Approximately 5% of members in UnitedHealthcare and Centene policies will be affected.
Still, most elderly citizens will have multiple options to choose from. They will, on average, have 34 Medicare Advantage plans with drug coverage to select from in their county for 2025, a slight decrease from the 36 plans available this year, according to the Centers for Medicare and Medicaid Services.
“Offerings remain stable, and people will continue to have ample, cost-effective options in both [Medicare Advantage] and the Part D [drug plan] markets,” Dr. Meena Seshamani, director of the Center for Medicare, stated last month.
Furthermore, this year's average monthly plan premiums will drop to $17 in 2025, a decrease of $1.23 from this year, according to the agency. Approximately 60% of enrollees who remain in their current plan will have a $0 premium in 2025. The vast majority of members will also have the same or lower premiums in 2025 if they stay in the same plan.
Increased medication costs
Elderly individuals should verify whether they will need to pay more out-of-pocket for medications in 2025, particularly for prescription medications.
Over 16 million enrollees are covered by plans without any deductible for any drug in 2022, according to Greg Berger, a partner at Oliver Wyman.
However, in 2025, more than 45% of these members will bear at least a deductible for certain drugs, such as brand-name or specialty medications, if they opt to remain in the same plan.
About 36% of enrollees in Medicare Advantage with prescription drug coverage are in plans with increasing drug deductibles by at least $200 in 2025, according to Jefferies. Those in UnitedHealthcare and Aetna will likely experience elevated deductibles. (Maximum drug deductible is $595.)
Insurance providers are also reducing their benefit allocations for dental, hearing, and vision care. For example, Aetna is drastically cutting its allowance by over $1,700 on average in its top 20 plans, while UnitedHealthcare is cutting it by over $750 on average.
Similarly, Centene, Aetna, and Humana are cutting their benefits that aid seniors in paying for over-the-counter medicine and supplying flexible spending cards.
Although older adults generally prioritize premiums while appraising their options, they should also evaluate other benefits and features of their Medicare Advantage options, Mary Beth Donahue, CEO of Better Medicare Alliance, a Medicare Advantage advocacy and research group, stated.
“Seniors and those assisting them during this process – caregivers, families, and aging organizations – should consider the full picture,” she emphasized.
Multiple consequences
The changes stem from several legislative and regulatory modifications to the Medicare Advantage program in recent times, as well as increasing enrollee utilization of healthcare services.
Critics have accused Medicare Advantage insurers of being overcompensated since 2019 for the care and services they provide, as numerous insurers categorize some enrollees as sicker than their counterparts in traditional Medicare to gain higher federal reimbursements.
Over the past few years, the Biden administration has introduced numerous changes to the Medicare Advantage payment system, particularly focusing on health status measurements and plan quality ratings, both of which impact insurers’ overall reimbursements. Some pandemic-related provisions that originally boosted insurers' quality ratings have also expired.
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It turns out that despite the Centers for Medicare and Medicaid Services increasing the rates, insurers claim that the payments are insufficient to cover their medical expenses.
Furthermore, Congress brought about considerable modifications to Medicare's drug benefit as part of the 2022 Inflation Reduction Act, which the Democrats managed to pass through both chambers. Some of the most significant alterations included an annual cap of $2,000 on Medicare enrollees' out-of-pocket prescription expenses, effective from January. Nevertheless, the law demands that insurers shoulder more of the costs once enrollees enter the catastrophic coverage phase above the cap.
To cope with the increased financial responsibility from the revamped drug benefit, some insurers are escalating their deductibles and implementing other adjustments to their prescription drug coverage.
"There are changes affecting revenues in numerous ways," said Knable. "As a result, insurers are being forced to reconsider their product offerings."
Despite the potential financial burden, it's crucial for elderly individuals to maintain their health and consider the impact of these changes on their medication costs.
The increase in medication deductibles for certain drugs, such as brand-name or specialty medications, could lead to higher out-of-pocket expenses for many enrollees, particularly in UnitedHealthcare and Aetna plans.
