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Making Medicare Advantage profitable again

health plan update
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health plan update
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We're certainly not the first people to notice that, for health insurers, Medicare Advantage has lost a bit of its luster. During Q4 and Q1 earnings season, an unmistakable correlation was obvious: the greater an insurer's exposure to MA, the worse its performance on medical loss ratio—with knock-on effects on its stock price. The opposite was also true: the less the MA exposure, the better the overall MLR performance.

Was the impact to stock price proportional to the increase (or decrease) in MLR? Of course not; MA's MLR (and even overall MLR) is just one factor. UnitedHealth Group has generated solid operating income growth by leaning on its hedge-and-flywheel strategy (not to mention selling some key assets), despite the Change Healthcare hack and its poor MLR showing. Though its stock price has hardly been stellar. Ahem.

But the halcyon days of MA as an unalloyed growth engine seem to be waning, for a number of reasons. For one, MA's sheer size in CMS's budget has attracted more regulatory scrutiny. Rate cuts, new star rating methodologies, and scrutiny on denials have taken their toll on reimbursement. And the intense competition for MA patients has meant ever-more generous benefits that seniors are, lo and behold, actually using. Back when nearly every new MA patient meant profitable growth (we're talking pre-2023), those benefits were competitive levers. But now they represent excess costs. Add in the inevitable uptick in demand as MA patients age—much to the (near-term) benefit of providers—and MA as a growth engine becomes, well, alloyed. But that doesn't mean it's through as a growth lever. In fact, it can't be.

Whatever its profitability challenges, MA continues to grow. In the past two years, MA and the individual market are the only health plan segments that have seen meaningful growth. Employer rolls have shrank (even as the economy has grown). Medicaid enrollment declined as redeterminations pushed pandemic-era beneficiaries off the program. That, plus increases in subsidies from Congress, have fueled the growth in the exchange-based individual market.

But altogether, MA remains a source of profitable growth—but it now comes with extra work to maintain that profitability.

In this week's Board Briefing (airing live on Thursday, June 13, at 1pm ET, and available on demand and as ready-to-use slides for members after that) we look at the current and future state of the health plan market, where we'll be asking and answering a few key questions, related to not only to MA but to other key lines of business:

  • What levers to insurers have to boost MA profitability? In earnings calls, most insurers cited a long-term margin target of 3%-5% for their MA business, which won't be achieved without a big focus on steerage and utilization management.

  • What does long-term growth for Medicaid managed care look like post-disenrollment? The economics of Medicaid still look quite appealing for insurers, mostly because of a widely held belief that risk levels can be managed down with a greater focus on care management for the highest-cost patients.

  • What can we expect from employer rate increases? Providers have continued to pass along costs to payers and therefore employers. What's the long-term prognosis for how wide the private-to-public cost subsidy will continue to get?

  • How have the shifts in growth and profitability of the insurance business altered the strategies of the major vertically-consolidated companies? As we'll discuss in the Board Briefing, changes in the insurance business have precipitated new areas of focus in the PBM and medical group sectors,

So if you haven't signed up yet, register here. Members will be able to see the entire webinar on-demand following the live airing of the presentation on Thursday, June 13, at 1pm. If you'd like to learn more about membership (or chat with our CEO about it), check out our Become a Member page.


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