By Henry Osowski

We have witnessed some challenging environments over the last two decades, but none as challenging as the current landscape for Medicare Advantage plans. Five months into 2024 the environment is displaying troubling signs of the challenges ahead. With the release of enrollment data for the last AEP many well-known plan sponsors experienced little or no growth. A few plans even saw significant loss of membership. Increasing medical loss ratios put even more pressure on financial results. Capping the bad news came with the release by CMS of the “Final Rule” for 2025.

MA plans were presented with a payment formula that projects a slightly negative reduction in payment rates of -.16%. Additionally, a long list of new sales, marketing, benefit utilization and clinical requirements will increase costs and challenge the sales process. Executive and benefit design teams are now struggling to respond to these challenges. We are already seeing early signs of market disruptions and potential chaos awaiting plans and Medicare beneficiaries as we look toward AEP 2025.

More than one national plan sponsor has shared with investors that benefit plan reductions, market withdrawals, and increased beneficiary costs, including potentially premium increases, are likely. Another national plan sponsor has reported a roughly $900 million operating loss and has expressed a goal of finding about a seven percent (7%) improvement in their bottom line. One other national plan sponsor is racing to conclude a sale of its MA business as a means of protecting margins for its other health business. We have also learned from important regional MA plans that are using this current environment to recalibrate their MA offerings and adjust their footprint. Margin protection is becoming the mantra, even at the expense of membership loss.

Though plan sponsors will not yet release 2025 bid information here’s what we might expect as we move toward AEP this year:

  • Benefit reductions and restrictions, especially among voluntary supplemental benefits, may be more common in marginal markets.
  • An increase in the use of flexible supplemental benefit options, putting the power of consumer choice in the hands of beneficiaries.
  • Increased premiums and co-pays, subject to reduced beneficiary out-of-pocket maximums, will be used to restore margins.
  • Reducing the number of benefit plan options available in marginal markets will be used to reduce benefit variability and manage administrative costs.
  • Increased focus on managing and improving revenue variables, such as Stars, Risk Scores, member retention and operating efficiency, that have a direct impact on margins.
  • Market exits in markets where there is no viable strategy to turn around financial results.

Complicating messaging strategies for this year’s AEP is that the first half of AEP coincides with the final four weeks of a contentious presidential and congressional election. In light of the current political turmoil, we can certainly anticipate that election chaos could continue throughout the remainder of AEP and even beyond. In a year when clear member and prospect communications will be critical, plans will have limited opportunity to broadly communicate challenging messages. Messaging professionals should now be strategizing and exploring other means of effectively reaching members and prospects.

While there are certainly some strong headwinds facing MA plans, the bottom line is that MA plans continue to offer beneficiaries significant value relative to Original Medicare. Importantly, MA plans proudly lead efforts to serve vulnerable and culturally diverse populations with high quality and appropriate care. The next year or two may not be easy,

But we are confident that the tremendous value provided, increased quality of care and targeted focus on member satisfaction will continue to drive MA successes.

 

Henry OsowskiHenry Osowski is Managing Partner of Strategic Health Group LLC, a boutique advisory firm providing a range of advisory services to Boards and Executive Management of Medicare Advantage and Managed Medicaid plans. He may be reached at 818-279-2196 or hwosowski@strategichealthgroup.com.