Medicare Advantage Enrollment Expected to Spike

Enrollment will increase and premium prices will drop as health plans prepare for the upcoming open enrollment period for Medicare Advantage, officials at the Department of Health and Human Services have announced.

Look for a 10% increase in enrollment to about 13.1 million beneficiaries while premiums shrink by 4% to an average $32 per month. Medicare Advantage, private health insurance available to Medicare beneficiaries, accounts for about 25% of total Medicare enrollment.

Government officials made the obligatory nod to the Affordable Care Act as the driving force behind the news but there are a lot factors at play here, including a bigger baby boomer population that’s comfortable with managed care and the move by businesses to shift their 65 year-old and older retirees off of expensive employee -sponsored plans and onto more cost-effective Medicare Advantage plans.

“Health plans see Medicare Advantage as a stable product where they can make money,” said Dan Mendelson, CEO of Avalere Health, a Washington, D.C.-based research firm. He noted that members are using less medical care, and reduced utilization has enabled plans to drop premium prices for the Medicare Advantage products.

He explained that health plans also are “learning to work with CMS (the Centers for Medicaid & Medicare Services) as customers, which is something we don’t often see in a Democratic administration.”

In addition, health insurers are looking at Medicare Advantage as a way to increase their overall market presence especially as they look to attract a share of the important individual market.

“If an insurer has a commercial plan in an area and wants to have a stronger presence in a market then having a Medicare Advantage product can help,” said Mendelson. That visibility will be critical as insurers compete for individual business through health insurance exchanges.

Time will tell if consolidation in the Medicare Advantage market will eventually mean higher premiums for beneficiaries. With the program expected to absorb more than $130 billion in cuts between 2010 and 2020, smaller players are already finding it more difficult to remain in the market.

In addition to the enrollment and premium news, HHS officials announced that in 2012 CMS will provide financial rewards to Medicare Advantage plans with high quality scores, under its five-star rating program. An estimated $6.7 billion is earmarked for the program. CMS will allow five-star Medicare Advantage and Part D plans to continuously market and enroll beneficiaries throughout the year, as an extra incentive for high quality performance.

“Plans that do a better job serving the needs of their Medicare members should be rewarded and all plans should be encouraged to improve their performance,” said Jonathan Blum, CMS deputy administrator and director of the Center for Medicare in a press statement.

Open enrollment begins on October 15^th and ends seven weeks later on December 7^th.