It was the most indelible image to emerge from last summer's infamous town hall meetings: an elderly man in Simpsonville, S.C. standing up to tell Congressman Robert Inglis to "keep your government hands off of my Medicare."
Funny and ironic as that statement was, it was also prescient in a way. Though Medicare beneficiaries and agents in the senior market have seen some changes resulting from the reform bill President Obama signed into law, it seems Congress did keep its hands off Medicare for the most part — at least compared to the comprehensive overhaul in the under-65 market.
But there were indeed changes, and where there is change there is opportunity. Now it's up to savvy agents to understand how the health care reform bill will affect the Medicare Advantage, Part D, and Medicare supplement plans they sell, and how they can capitalize on the opportunities that will inevitably arise from this change.
Medicare Advantage
The Obama administration delivered on its promise to damage the Medicare Advantage program. Short of a repeal or non-funding by a Republican-controlled Congress, MA plans will face the most change of all Medicare-related programs. But there are opportunities as well. Here are key changes resulting from health care reform:
- The quality ratings you see on Medicare.gov aren't consumer ratings, but scores determined by CMS. The five-star ratings will carry some teeth in the future. Only one out of four Medicare Advantage plans garner a four-star rating. They will be the big winners, with reimbursement rate quality bonuses of up to 10 percent in certain markets.
- A minimum loss ratio of 85 percent will be required. Beginning in 2014, plans will be required to return the difference to CMS if loss ratio is too low. Plans can be suspended if loss ratios remain below 85 percent for two or more consecutive years, or terminated for five consecutive years. Any squeeze on profit margins means the carrier will have to operate on lower expenses. That can't be good news for agent commissions.
- Payment rates for 2011 are frozen at 2010 levels, so MA carriers aren't facing any immediate cuts. Beginning in 2012, however, the payment methodology changes for insurance carriers. Counties will be classified in one of four county quartiles with some rural and suburban areas receiving up to 115 percent of the traditional Medicare amount and more urban, populous counties as low as 95 percent of standard Medicare rates. In 2010, 34 percent of Medicare Advantage beneficiaries are in counties slated to receive the higher reimbursement rates in the future. Carriers will be even more selective about where they choose to market their products.
- For those agents who hated selling during the heavy retail selling season and the holidays, there is reason to smile. The Annual Election Period (AEP) will change in the fall of 2011 to October 15 through December 7. The Open Enrollment Period (OEP), starting in January 2011, will be 45 days reserved only for those beneficiaries who want to leave a Medicare Advantage plan and return to original Medicare and a Part D plan.
Our Take: The carriers with low administrative costs and high quality win. The shift in focus toward disease management, medical management, and network development — which was already underway — will continue. Expect the carriers to be even more demanding on agent compliance issues in order to maintain their star ratings.
Carriers with an established presence and strong cost control methods will prevail and some carriers will likely be forced out of the market. Most MA carriers are already managing to an 85 percent loss ratio. Don't expect big changes in commissions since they are already regulated by CMS. The growth rate for Medicare Advantage plans will decline, primarily due to carrier exits from certain markets.
Part D
