Cigna Corp., Harvard Pilgrim Health Care, several Blue Cross Blue Shield plans and others aren't renewing hundreds of Medicare Advantage plans, which are Medicare policies administered by private insurers. The moves will displace some 700,000 beneficiaries who must find new policies, according to Humana Inc., a large seller of Advantage plans.
For 2011, the Kaiser Family Foundation said there will be a 13% decline in the number of Medicare Advantage plans.
The pullback is largely due to a 2008 law that required the plans to have networks of preferred doctors, with the idea that managed care could be less costly and aggressive marketing could be curbed. Some providers of traditional fee-for-service policies decided to close the plans rather than invest in networks. But some insurers say the federal health-care overhaul, which includes $140 billion in cuts to reimbursements for Advantage plans over 10 years, is a factor as well.Insurers are also saying as the market tightens up more plans will close and prices will go up.
"It is hard to imagine these cuts to Medicare Advantage and nothing is going to change," said Michael McCallister, chief executive of Humana. The firm closed or merged 31 fee-for-service plans for next year, but sees growth in its remaining business as it picks up seniors displaced when competing plans close.Back in August we learned that a plan by Medicare to try to make it simpler for consumers to pick drug coverage could force 3 million seniors to switch plans next year whether they like it or not. These seniors see their will see their prescription plan eliminated as part of a new effort by Medicare to eliminate duplicate plans that offer the similar coverage. These seniors would not lose coverage, but they probably will see changes in their premiums and copayments.
Medicare Advantage is expected to bring in more than $51 billion in revenue for major health plans this year, according to a Goldman Sachs estimate. That revenue could drop to as low as $37 billion in the next few years as the cuts kick in, Goldman estimates, but insurers likely will find new ways to bring in business, and sales are expected to climb back to $51 billion by 2018.