Medicare Advantage plans are at a pivotal junction, grappling with the aftermath of heightened medical procedure demands and shifting administrative payments. Popular for their zero monthly premiums and a range of additional benefits such as vision, dental coverage, and fitness memberships, these plans face a revenue challenge that has pressed insurers into a make-or-break decision phase. They may now need to choose between preserving growth at the expense of profit margins or streamlining benefits to protect profits.
The industry consensus points towards a likely reduction in benefits next year, a move anticipated to dampen enrollment growth. Insurers have been candid in their earnings reports about escalating medical costs, suggesting these trends could persist. Notably, Humana’s forecast indicates prolonged financial pressure, mirrored by its declining stock value following the disclosure of unanticipated medical expenditure.
Compounding the sector’s concerns is the Centers for Medicare and Medicaid Services’ (CMS) 2025 rates proposal, regarded by insurers as an effective decrease in payments—a perception counterweighted by historically successful lobbying efforts by the insurance sector to amplify rates during this period. CVS, which owns Aetna, has also voiced these financial pressures, contrasting with prior year’s ambitious benefits expansion that significantly bolstered its Medicare Advantage enrollees.
But the unforeseen rise in medical costs has necessitated adjustments—CVS has downgraded its earnings forecast and expects marginal profitability in its 2024 Medicare operations. “Recovering margin overtakes market share gains,” states Brian Kane, president of Aetna. This reflects a shift in strategy prioritizing sustainable profitability over growth.
What’s unfolding within the Medicare Advantage program appears to be a tempering of the aggressive expansion once likened to a gold rush. For example, Cigna parted ways with its Medicare division post-Humana acquisition talks, an exit met with investor approval. Centene, as expressed by CFO Andrew Asher, is retreating from aggressive Medicare Advantage growth to recoup margins in the latter part of the decade, even if it means offering plans that are somewhat less appealing to seniors.
These developments are signals that indicate the broader economic considerations influencing policymakers at CMS. The takeaway, albeit unwelcome to some, is clear: a future where Medicare Advantage plans may offer leaner benefits.
As always, our Medicare Support team at Insurance Connection USA are here to help you understand any changes in Medicare or help with any questions you may have.