More than 1M patients lose coverage as insurers, hospitals drop Medicare Advantage

As Medicare's open enrollment season kicks off, more than 1 million patients will have to shop for new health insurance. This sudden shift in coverage is the result of several major insurers and hospitals dropping their Medicare Advantage plans, a trend that’s leaving many seniors and individuals with disabilities scrambling to find alternative options.

The Shrinking Pool of Insurers

Medicare Advantage plans, also known as Medicare Part C, have been increasingly popular among Medicare beneficiaries. In 2024, 32.8 million people are enrolled in these plans, accounting for more than half (54%) of the eligible Medicare population (KFF). However, despite their success in enrolling beneficiaries and delivering services, some insurers are downsizing their share of the market.

Humana, one of the largest providers, has announced plans to exit 13 markets nationwide, affecting approximately 560,000 members. This move is part of Humana’s strategy to focus on more profitable areas, as CFO Susan Diamond noted during a recent conference (Humana). CVS Health Aetna and Centene Corp are also pulling out of unprofitable markets, citing cost pressures and shrinking profits (KFF).

The Impact on Patients

The departure of these major insurers means that hundreds of thousands of Medicare Advantage customers will need to find new coverage. This can be a daunting task for many seniors who are not familiar with navigating the complex healthcare system.

For instance, if Humana cuts 5% of its enrollment, an additional 305,000 Medicare Advantage customers would lose coverage. Similarly, if CVS drops 10% of its enrollees, it would force approximately 420,000 members to find alternative plans (KFF).

Financial Pressures and Changing Industry Dynamics

The primary reason behind this mass exodus of insurers from Medicare Advantage is the financial strain on the healthcare industry. Insurers are facing reduced profits due to lower reimbursement rates from the Centers for Medicare & Medicaid Services (CMS). The annual capitation rate, which determines the upfront payment to healthcare providers, has not kept pace with escalating healthcare costs (KFF).

Moreover, CMS finalized a slight decrease in Medicare Advantage benchmark payments for 2025. This has major ramifications on insurers’ ability to extract profits from Medicare Advantage plans, leading them to reassess their market presence (KFF).

Hospitals’ Role in Medicare Advantage

Hospitals too are feeling the pinch. Many are canceling or not renewing their contracts to serve plan members, further exacerbating the situation. This decision is often driven by low reimbursement rates, which hospitals claim are not sufficient to cover their costs (KFF).

The combination of these factors has created a perfect storm, leaving Medicare Advantage customers in a precarious position. As one health policy analyst noted, "While alternative options may remain accessible from different companies, the transition can still be challenging for many enrollees" (Newsweek).

What Can Patients Do?

For those who are impacted by the loss of their coverage, there are several steps they can take:

• Join Another Medicare Advantage Plan: If you are within 2 full months of losing your current coverage, you can join another Medicare Advantage plan with drug coverage or switch to a new plan (Medicare.gov).
• Drop Your Medicare Advantage Plan and Return to Original Medicare: If you find that switching plans is not feasible, you can opt to return to Original Medicare, which is administered by the federal government. However, you might need to purchase additional coverage like Medigap or a Medicare drug plan (Medicare.gov).
• Explore Special Enrollment Periods: Certain life events like moving or losing other coverage can trigger special enrollment periods, allowing you to change plans within specific time frames (Medicare.gov).

Finding the Right Plan

Navigating the differences between various Medicare Advantage plans can be overwhelming. Here are some key factors to consider when selecting a new plan:

• Premiums and Out-of-Pocket Limits:
  • Many Medicare Advantage plans offer competitive premiums and lower out-of-pocket limits compared to Original Medicare.
  • For instance, in 2024, Medicare Advantage plans received an additional $2,329 per enrollee above their estimated costs of providing Medicare-covered services, which they can use to offer additional benefits like reduced cost sharing (KFF).
• Coverage and Networks:
  • Ensure that the new plan has a network of healthcare providers that align with your current needs.
  • Some plans also offer additional benefits such as dental services or over-the-counter (OTC) cards, which may be crucial for certain individuals (Humana).
• Star Ratings and Quality:
  • Look for plans with high star ratings, which indicate better performance in areas such as customer service and quality of care.
  • Plans with low star ratings might offer limited services or have higher out-of-pocket costs (Medicare.gov).

The Future of Medicare Advantage

As the healthcare landscape continues to evolve, it is clear that Medicare Advantage plans will face significant challenges in maintaining profitability. Policymakers are closely monitoring the situation and exploring ways to improve the payment methodology for Medicare Advantage plans.

Policy Implications

• Payment Reforms: Policymakers are considering reforms aimed at better aligning payment rates with actual healthcare costs. This could include more nuanced capitation rates or additional incentives for high-performing plans.
• Benefit Enhancements: To attract more enrollees and provide better value, insurers might focus on enhancing benefits such as supplemental coverage for dental services or OTC medications.
• Consumer Protection: Ensuring that consumers have adequate information to make informed decisions about their coverage options will be crucial. This could involve clearer communications about plan changes and better online resources for comparing plans.

Conclusion

The sudden loss of coverage for over 1 million patients highlights the complexities and challenges within the Medicare Advantage system. While there are steps patients can take to find new coverage, it underscores the need for policymakers to address the underlying financial pressures and ensure that the system remains sustainable and accessible for all beneficiaries.

As the open enrollment season begins, it is essential for individuals impacted by these changes to take proactive steps in securing their healthcare needs. By understanding their options and navigating the available resources, they can find suitable alternatives that meet their specific requirements.

References

• KFF
• Humana
• Medicare.gov
• KFF Premiums Out-of-Pocket Limits