The Obama administration announced that average premiums paid by individuals for private Medicare Advantage plans, which insure about 1/4 of all beneficiaries, will decline slightly next year, even as insurers provide additional benefits required by the new health care law.
This contrasts with commercial insurance premiums which may increase 10% to 25% or more for many people younger than 65 and small businesses. Insurers say that much of the increases is attributable to requirements of the new law.
Many of the law’s new requirements take effect this week. See Health Care Reform 6-Month Status Report, a publication by Health Access that documents how the new health care law is affecting Californians and examines major provisions effective on 9/23.
The announcement of MA plans’ cost decrease came as a bit of a surprise. Many Congress people and health policy experts predicted an increase similar to that seen with commercial insurance for younger populations, especially since, as a way to address the past overpayment to MA plans, 2011 plan payments rates will basically stay at 2010 levels.
Yet Medicare officials said they were able to hold down premiums and copayments by negotiating with insurers, which sponsor the Medicare Advantage plans. The health care reform law, signed by President Obama in March, gave officials new power to negotiate and to reject bids, as they did in several cases. In fact, in reviewing bids, Medicare officials identified 300 private plans that unfairly proposed to increase out-of-pocket expenses for beneficiaries while increasing their own profit margins. CMS officials rejected these bids, telling them they must do better in order to be approved. After negotiations, most plans improved their benefits by an average of $13 per member per month.
Medicare Advantage premiums will on average be 1% lower in 2011 than today. Premiums for a particular plan in a particular county may increase next year, yet beneficiaries will most likely be able to find other plans offering a better deal. Medicare Advantage plans also project that enrollment will increase by 5% in 2011. Plans can begin marketing to beneficiaries on Oct. 1 for coverage that starts Jan. 1.
John K. Gorman, a former Medicare official who is now a consultant with clients in the insurance industry commented on the price decrease saying that: “Today’s announcement shows that there is a new sheriff in town. Medicare officials were very specific and very forceful. Insurers succumbed to the government’s demands and stayed in the Medicare market because they have become much more dependent on Medicare business.”
Payment rates for subsequent years will also be subject to tighter constraints. The cuts made in the health care reform law are expected to save $136 billion over 10 years.
See Medicare Advantage for more information on MA plans.
For info on health care reform and Medicare, see our article, What Does Health Care Reform Mean for Medicare Beneficiaries? Summary of Key Provisions.
This article was edited in part from a NY Times article, September 21, 2010.