In 2019, more than 20 million members enrolled in Medicare Advantage (MA) plans. That number is expected to grow to more than 30 million members before 2030.1 For the 2020 plan year, the Optum Advisory Services actuarial practice is highlighting 2020 premium and supplemental benefit changes.
We believe that MA growth can help private health plans continue to expand benefit offerings above what is available to members in fee-for-service (FFS). And at little to no additional cost to members.
Four key observations
- In 2020, MA realized a significant increase in plan offerings from 3,811 to 4,401
- Member premiums are remaining relatively flat from 2019 to 2020 at $26 PMPM
- More than 40% of individual MA plans have a premium of $0
- Supplemental benefit offerings are increasing
“Other” supplemental benefit changes1
At the beginning of 2019, the Centers for Medicare & Medicaid Services (CMS) expanded its interpretation of the supplemental benefit standard. This allows health plans to offer benefits previously not allowed. Here’s how CMS described it in their 2019 Final Announcement:
“Under our new interpretation, in order for a service or item to be “primarily health related” under our three-part test for supplemental health care benefits, it must diagnose, prevent, or treat an illness or injury, compensate for physical impairments, act to ameliorate the functional/psychological impact of injuries or health conditions, or reduce avoidable emergency and healthcare utilization. Any supplemental health benefit proposed by an MA organization must be reasonably and rationally encompassed by this standard and may not have a primary purpose that is outside of this standard. This will allow MA plans more flexibility in designing and offering supplemental benefits that can enhance beneficiaries’ quality of life and improve health outcomes.”
Optum reviewed the frequency of Medicare plans offering “other” supplemental benefits within their Plan Benefit Package (PBP) defined under categories 13d-13e and 14c. On average, individual MA plans offered 2.8 other supplemental benefits in 2019. In 2020, the average number of other supplemental benefits increased to 3.2. The following graph highlights the coverage increase for the largest other supplemental benefit categories:
The most prominent benefit offerings increase across plans is in telehealth services under PBP category 14c7. This was anticipated because for 2020, CMS added additional supplemental telehealth services to the basic benefit. CMS does not require plans to use rebate dollars to fund telehealth benefits.
The list in the above graph is certainly not exhaustive, given the flexibility health plans have to enter their benefits into the PBP software. For example, PBP category 13h includes more than 15 “Additional Services” categories that include additional supplemental benefits that health plans can offer. The purpose of our review was to highlight that health plans have increased other supplemental benefit offerings from 2019 to 2020. We see this clearly by reviewing PBP categories 13d-13e and 14c. Health plans not expanding benefit offerings may be considered uncompetitive and lose market share overtime.
Observations of member premiums2,3
With plans expanding their benefit offerings, one would assume the member premium would have increased for 2020. In reality, we observe health plans decreasing or keeping 2019 member premium flat for 2020. This may be partly attributed to increased competition with more health plans entering the market and the expected growth opportunities as eligible members choose MA over FFS. In 2019, there were more than 3,800 individual MA plans offered nationwide. Of those, almost 1,500 plans had a $0 premium. In 2020, the number of individual MA plan offerings has grown from 3,811 to 4,401, with almost 1,900 of these plans with a $0 premium.
The premium change for members currently enrolled in MA will vary from plan to plan. But on average, the premium in 2020 will remain flat at roughly $26 PMPM when compared to 2019 plan premiums. In the following graph, we highlighted the distribution of MA plans by premium level in both 2019 and 2020. As you can see, the volume of plan options to members with a premium below $25 has increased substantially from 2019 to 2020.
Since CMS relaxed the rules on what a health-related supplemental benefit is, health plans have increased the number of other supplemental benefits they are offering to Medicare members. They are offering these other supplemental benefits attempting to attract members to their plans. Adding these benefits did not increase premiums to Medicare enrollees, which is driving increased value in Medicare Advantage plans. Plans not offering increased value may quickly become uncompetitive in their market.
About the Author
Randall Fitzpatrick, FSA, MAAA
Optum Advisory Services
Vice President, Payer Actuarial Services
Randall Fitzpatrick is a vice president with Optum Advisory Services. He provides consulting services to health insurers, Medicare Advantage organizations, managed care organizations and health care providers. His expertise includes pricing and filing of Medicare Advantage Part C and Part D bids, reserving, provider contract analytics and strategic market analyses for Medicare Advantage. Randall also provided actuarial services to CMS for the review and audit of its bid pricing tools.
He has been providing actuarial services for more than 16 years. Prior to joining Optum, Randall was a principal with Oliver Wyman.