Large health insurers plan to make cuts to their Medicare Advantage programs
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Facing anticipated reductions in funding and regulatory changes under the health care reform law, several of the nation's largest health insurers have indicated plans to scale back their Medicare Advantage programs.
Beginning in 2014, insurers' Medicare Advantage plans will be held to a minimum medical-loss ratio of 85% under the Patient Protection and Affordable Care Act. The reform law also calls for a $156 billion reduction in Medicare Advantage payments by 2022.
Those cuts, coupled with the 2% overall reduction in Medicare spending under the Budget Control Act of 2011 and potential further cuts resulting from ongoing budget negotiations in Congress, prompted senior executives at several leading health insurers to outline planned withdrawals from certain Medicare Advantage markets and narrowed Medicare benefit plan offerings during recent calls with securities analysts.
UnitedHealth Group Inc. and Humana Inc., which together account for about 37.5% of all Medicare Advantage enrollments, said that anticipated 2014 market withdrawals will affect roughly 5.1% and 3.2% of their total Medicare Advantage members, respectively. However, insurers indicated that most of the members affected by market withdrawals would be offered coverage under a different Medicare Advantage plan.
“The depth of the underfunding of these benefits to seniors is causing us to exit certain market areas, reduce the number of plan offerings and reduce benefits in the majority of the local markets we serve commensurate with our review of the competitive position and long-term sustainability of our services for each individual market,” UnitedHealth Group CEO Stephen Hemsley said during the company's July 18 conference call with analysts.
