Medicare Enrollment

Despite dire predictions for the state of Medicare Advantage enrollment as a result of reimbursement reductions as part of the Affordable Care Act, insurers added nearly 1 million new enrollees for 2014. This continues a trend of increasing Medicare Advantage enrollment since the enactment of the ACA, up 41% since that time.

Much has been made of the proposed reductions in reimbursement rates to carriers. According to the Medicare Payment Advisory Commission, Medicare Advantage enrollees cost 116% of what Medicare incurs for traditional fee for service enrollees in 2009. The good news is that that gap appears to be closing, with an estimated rate of 106% for this year. Still, it seems likely that we will continue to see pressure on reimbursement rates to insurers leading to reductions in benefits or increases in premiums in the future.

Thankfully (for our Medicare clients), we have seen very little impact so far on the premium side of the equation, with the average premium of about $35 per month in 2014 holding relatively flat since 2012. We have, however, seen increases in the average out-of-pocket spending limits. The share of enrollees in plans with limits greater than $5,000 almost doubled between 2013 and 2014, with 44% of 2014 enrollees now enrolled in these plans with higher limits.

As a point of caution: Seniors (and therefore agents) tend to focus more on the premium than on out-of-pocket limits in making a buying decision. It is important that you make your clients aware of the exposure so that they may make an informed decision.

The national trends (increased enrollment, reasonably flat premiums and higher out-of-pocket limits) carry over to the NW states (Washington, Oregon and Idaho).

Oregon continues to lead the way in terms of enrollment penetration with over 300,000 people, or 43% of Medicare eligible enrolled in a Medicare Advantage plan. This was up one full percentage point from 2013. 77% of Oregons Medicare Advantage enrollment was represented by five insurers: HealthNet, Kaiser, Providence, Regence and United Healthcare, each representing about 17% of the Oregon market. HealthNet was the biggest gainer, adding about 7,000 enrollees over this past year.

Washington actually has about 20,000 more Medicare Advantage enrollees than Oregon but because they are a more heavily populated state, the penetration percentage is lower at 29%. Still, we saw an increase of nearly 25,000 enrollees (or an increase in the penetration rate of 1%) over the past year. Over half of Washingtons enrollment comes from two insurers: UHC and Group Health. The rest is scattered among a number of carriers with Regence (with 35,000 enrollees) representing the third largest enrollment level.

Idaho follows pretty much the same pattern, showing an increase in Medicare Advantage penetration from 29% to 30%. Regence is by far Idahos largest MA plan, with their nearly 35,000 enrollees representing over 40% of Idahos all MA enrollment. Pacificsource Community and United Healthcare are the next two largest insurers, holding another 40% of total enrollment between them.

One shift that has not gained much attention though I suspect that you are well aware of it, has been the movement from PPO to HMO plans between 2013 and 2014. The growth in MA enrollment for all three northwest states came in the form of increased HMO enrollment with PPO enrollment being flat to down slightly.

What can we learn from this To me, it just validates that interest in Medicare Advantage plans remains strong. One survey suggests that over 50% of todays baby boomers are choosing a MA plan when they turn 65. At the same time, I suspect that the trend towards increased HMO enrollment (vs. PPO enrollment) is likely to continue and obviously we should expect to see pressure on premium levels and benefit levels into the future. Remember, the only constant with Medicare is change!