Insurers pinched by ACA cuts in MA

November 22, 2013

UnitedHealthcare and other plans are dropping network providers

America’s Health Insurance Plans’ (AHIP) President and CEO Karen Ignagni sent a letter to the Centers for Medicare and Medicaid Services (CMS) expressing concerns about the impact of  Medicare Advantage payment cuts related to the Affordable Care Act (ACA).

More than $200 billion in payment cuts are expected. According to AHIP, Medicare Advantage plans are “facing a reduction in payments in 2014 at the same time healthcare costs continue to rise.”

UnitedHealthcare, Humana and others have sent termination notices to providers, indicating that ACA pay cuts have forced their hand in making network reductions. United is not disclosing the specific criteria it used to decide which providers to eliminate. However, the plan stated to the Hartford (Conn.) Medical Assn. that it considered quality, physician panel size and cost of the providers’ services. Approximately 19% of the plan’s physician network in Connecticut will be terminated as of February 1, 2014, but in other states, reductions are as high as 45%, according to the association.

J.D. Kleinke, healthcare economist and MHE editorial advisor, believes the termination of providers is usually-but not always-related to the prices the providers command from their insurance partners.

“They’re going to a smaller network with lower price,” Kleinke says.

Narrow networks

One way health plans are helping to mitigate the ACA cost impact is by creating narrow networks-a trend happening not just in Medicare Advantage but also in the exchange markets. Such high-value provider networks limit contracts to a smaller number of physicians that have a track record of providing quality and cost-efficient care delivery. AHIP’s letter asks CMS to resist efforts to limit the ability of Medicare Advantage plans to establish narrow networks because it could result in benefit cuts and higher out-of-pocket costs for seniors.   

“Medicare health plans are doing everything they can to keep coverage as affordable as possible for the more than 14 million seniors and people with disabilities who rely on this critically important part of Medicare,” says AHIP spokesperson Clare Krusing.  “Medicare Advantage continues to be popular among Medicare beneficiaries because of the better services, higher-quality care, and additional benefits these plans provide.” 

The federal government will reduce payments to Medicare Advantage plans to move them more in line with its outlays for traditional fee-for-service Medicare, with a gradual reduction over the next several years. Bonus payment for the star quality program will also be reduced.

An additional concern could also be the overall attractiveness of the Medicare Advantage market in the future. If private insurers don’t see value in participating, many could exit the market, causing mass policy discontinuations for seniors, as they did a decade ago in Medicare+Choice. Open enrollment 2014 also saw a 5.3% decrease in available plans, according to Avalere Health.

About one-third of Medicare beneficiaries are in Medicare Advantage private plans.

Law loses traction

Plans are struggling to react quickly to the chaos of the ACA rollout, including the sudden about-face on discontinued plans. The administrative costs are mounting at a time when administrative expenditures must be limited under the ACA’s rule on medical loss ratios. While they don’t want to return to the status quo, they are no doubt tempted to limited their participation and adopt a new wait-and-see attitude.

The Kaiser Family Foundation also reports support for the law has dropped significantly in the public eye. In its November tracking poll, roughly half of the consumers surveyed (49%) how hold a negative view of ACA, while 33% hold a positive view.

In the four years of polling consumers on the law, KFF notes, the gap between negative and positive views has been this large only once before: in October 2011 in the ramp up to the Republican presidential primaries.

The shift in public opinion can be attributed to a number of factors:

  • The problems plaguing the exchange web sites, most notably healthcare.gov;

  • News coverage of discontinued plans that are not ACA-compliant, even though President Obama had previously promised Americans could keep their plans;

  • The advent of narrow networks, reducing access to established providers for some health plan members.