Most commercial health plans in New York maintained profits in 2008 despite the onset of the recession because they were buttressed by strong Medicare Advantage returns, according to a new United Health Fund report.
Those strong returns could soon be threatened though. United Health Fund said there may be a "rough road ahead" in Medicare Advantage, with possible major cuts to the program under healthcare reform, adding its fee-for-service plans may "wither on the vine."
United Health Fund officials also noted a continued decline in enrollment in commercial markets, and growing dependence on public insurance against the backdrop of state fiscal challenges, citing those concurrent events as causes for concern.
"Challenges may lie ahead due to possible payment reductions proposed in federal healthcare reform legislation or budget pressures further down the road," according to the report, The Big Picture Update: Current Status of New York's Health Insurance Markets, a follow-up to an October 2009 publication.
"Medicare Advantage income continues to be critical to health plans' bottom lines," author Peter Newell, co-director of the United Health Fund's health insurance project, said in a statement. "But if changes on reduction in the payments are adopted either as part of federal deficit reduction or as part of health care reform to offset coverage expansions, health plans—and consumers—will have to adjust to a vastly different landscape."
The report focused on health plan enrollment and financial results to profile New York's private markets and state and federal public managed care funds. It was written by Newell, Allan Baumgarten, a consultant, and Jenny Heffernan, a research assistant for United Hospital Fund, a health services research and philanthropic organization.
The House and Senate are in the midst of reviewing legislation for healthcare reform, with proposals that may result in significant payment reductions to Medicare Advantage insurers, at least $100 billion over a 10-year period. More than 10 million seniors are enrolled in Medicare Advantage, and the changes could result in fewer options for them.
In 2008, Medicare Advantage "continued to be a reliable source of health plan profits, amounting to $400 billion," according to the report. In New York, Medicare Advantage plans increased by 18% from 2007 to January 2009, exceeding 800,000 members, according to the report.
As far as Medicare Advantage is concerned, the report stated that there may be a "rough road ahead," noting that its "income makes up a large proportion of overall health plan net income and may not be sustainable if federal healthcare reform relies on spending restrictions in Medicare Advantage premium payments to support non-Medicare coverage expansion or if broader deficit-cutting measures outside of the context of healthcare reform include similar premium reductions."
The report added, "Many observers believe Medicare Advantage private fee-for-service plans may also wither on the vine because of requirements that these plans form provider networks in 2011."
Overall, "As of 2008, New York health plans were, for the most part, weathering the recession, retaining surpluses, and maintaining profitability," the report states.