Medicare Advantage

Continuous Enrollment Seen as Boon for Private FFS Medicare Advantage Plans

Reprinted from the Jan. 11, 2007, issue of MEDICARE ADVANTAGE NEWS, biweekly news and analysis on the Medicare (and Medicaid) managed care programs.

Thanks to a legislative change in the waning moments of the 109th Congress, private fee-for-service (PFFS) and other Medicare Advantage (MA) plans that do not cover drugs will be able to enroll customers throughout 2007 and 2008.

Analysts are split on the impact of the change, with some contending the provision unfairly gives advantages to a rapidly growing (and possibly under-regulated) sector of the market, and others saying the pool of eligible beneficiaries is too small to make a difference.

The last-minute provision, wrapped into the Tax Relief and Health Care Act of 2006 (H.R. 6111), gives Medicare beneficiaries all of 2007 and 2008 to join MA plans that do not offer drug coverage. Under Part D, MA prescription drug (MA-PD) plans may enroll beneficiaries only between Nov. 15 and Dec. 31, and MA-PD beneficiaries have just one chance to switch plans before March 31. President Bush signed H.R. 6111 into law on Dec. 20.

The extended-enrollment provision was introduced by outgoing House Speaker Dennis Hastert (R-Ill.) after lobbying by a group led by Chicago-based Aon Corp. Sterling Life, a subsidiary of Aon, is poised to benefit from the expanded enrollment period. Sterling offers MA PFFS plans without drug coverage in 49 states.

Aon spokesman Al Orendorff tells MAN: "We think the bill is a good idea for seniors. We were part of a group of other insurance companies that lobbied on behalf of the change because we don't see any reason for seniors to have to make [this] decision in an arbitrarily compressed time frame."

On its Web page, Sterling says its MA-only PFFS plan, Option I (available in 49 states but not in California), reimburses providers faster and with less utilization review than do HMO-style MA plans. The company also offers an MA PFFS plan with drug coverage, called Option II.

Provision Could Fuel PFFS Plan Growth

The number of PFFS plans has grown sevenfold since 2004, and the provision will have the effect of "pouring gasoline on an open flame," says John Gorman, president and CEO of consultant Gorman Health Group, LLC in Washington, D.C.

According to an analysis of CMS's landscape of 2007 plans, nearly 30% of MA plan offerings are PFFS plans without drug coverage.

Apart from Sterling, the biggest sponsors of non-drug PFFS plans are: SecureHorizons (PacifiCare/UnitedHealth Group), offering plans in all 50 states; SecurityChoice (UniCare/WellPoint, Inc.) with plans in 43 states; and Advantra (Coventry Health Care, Inc.), with non-drug PFFS plans in 43 states. WellCare Health Plans, Inc.'s Duet is offered in 38 states; Today's Option, fielded by Houston-based Heritage Health Systems, is available in 35 states; Sierra Health Services, Inc. offers Optima and Optima Plus in 29 states; and Health Net, Inc. offers Pearl Options in seven states, according to the landscape of plans.

The move could disadvantage companies that fielded only MA-PDs with drug coverage, including Special Needs Plans (SNPs), which must offer drug coverage. Companies must by law field at least one MA HMO with drug coverage before they offer any MA HMOs without drug coverage, Gorman notes.

The influx of enrollees stemming from the enrollment deadline waiver could enable plans to enroll beneficiaries first in MA-only plans, before finally transitioning them into MA-PD plans, analysts say.

Not just PFFS plans can benefit under this provision. Some 129 non-drug MA local HMOs operate in more than 2,000 counties across 40 states, according to the landscape of plans. Most carriers operate such plans in only one state, except for United's SecureHorizons (eight states), Aetna, Inc. (six states), WellCare (five states); Health Net (four states), Humana Inc. (three states) and Mercy Health Plans (two states).

The regional PPO market for MA plans without prescription drug coverage is dominated by three companies: Humana, Aetna and United.

A proliferation of plan offerings does not equal high enrollment, though, and to date, less than 10% of Medicare-eligible beneficiaries are in plans without drug coverage, according to a Dec. 14 Lehman Bros. report.

"The target market is.small and the product offering that is receiving the exemption is less compelling than many of the plans currently sold," Lehman securities analyst Josh Raskin wrote . Beneficiaries will choose MA-PDs because they offer "one-stop shopping" for Part A, B and D benefits, he wrote.

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