January 13, 2020
From the concept’s first introduction in the 1970s, the private coverage version of Medicare, Medicare Advantage, has continually evolved in response to demographic, political, and market forces. Today, payers offering Medicare Advantage plans face a variety of new challenges, and that’s without considering the potential disruptions to the market from the 2020 election or legal challenges to the Affordable Care Act (ACA).
Many of these pain points in the healthcare industry are a result of the ‘good problem’ of Medicare Advantage plan success. As the market has grown in sync with the “silver tsunami” of Baby Boomers aging into Medicare eligibility, so too have the challenges healthcare plans face in attracting, educating, and retaining members.
This dynamic has recently been compounded by the reintroduction of what is now called the Medicare Advantage Open Enrollment Period (OEP).
The blog Boomerbenefits.com explains, “This Medicare Advantage Open Enrollment Period is not new. It used to be a regular part of each Medicare year before the ACA legislation discontinued it. It allows individuals enrolled in a Medicare Advantage plan to make a one-time change early in the year.”
While the original OEP only allowed members to disenroll and return to original Medicare, the new OEP reintroduced in 2019 allows enrollees to change from one Medicare Advantage plan to another. This is in addition to the existing period during which such changes can be made: the Annual Enrollment Period (AEP).
With this change, the era of the switch has ramped up. Healthcare plans are facing the following five pain points in attracting and retaining members at a time when the hurdles to plan switching are lowered.
The confluence of the demographic wave of aging Americans and the market opportunity made possible by regulatory easing on Medicare policy has led to a boom in Medicare Advantage plans. An analysis from Accenture found that “more than 40 percent of health insurance M&A deals in 2017 involved Medicare Advantage expansion.” The Kaiser Family Foundation found that 2019 offered more plans than in any year since 2009:
Health insurance market analyst firm, Mark Farrah, says, “a total of 4,407 distinct Medicare Advantage (MA) plan offerings are in the market lineup for the 2020 AEP….” This reflects a sizeable increase from 3,084 in 2019.
CNBC reports, “For Medicare beneficiaries, the expansion amounts to a 32% increase in the number of Medicare Advantage plan choices compared to last year — in some markets that means 20 options or more.”
They attribute this expansion, in part, to a Trump Administration policy change that gives insurers greater flexibility to include additional benefits that go beyond add-ons like dental and vision plans.
This heightened competition isn’t just apparent in the number of available plans to choose from. It is also reflected in the information overload potential enrollees face during the enrollment periods. As healthcare industry marketing firm Medialogic points out,
“One of the biggest challenges faced by healthcare marketers during the Medicare Annual Enrollment Period (AEP) is that it only lasts 53 days. During this compressed time, Medicare Advantage plans of all sizes from regional health plans to national players are elbowing one another out of the way as they jockey for positioning in front of Medicare-eligible prospects.”
With higher awareness among members that they have the option to switch plans, and multiple plans to choose from, it’s no surprise that plan switching is another of the pain points in the healthcare industry.
Plan switching in of itself isn’t new. Accenture research indicates that “13 percent of existing Medicare beneficiaries leave their current plans each year, with 10 percent voluntarily switching and 7 percent switching carriers.”
As switching becomes more common, health plans that previously focused solely on attracting those aging into Medicare each year need to look beyond age-ins to engage and attract switchers.
Accenture estimates that Medicare switchers "represent 4.3 million (64 percent) of the ~6.7 million members up for grabs each year for health plans.” That makes switchers a comparable segment to the roughly four million baby boomers who age into the market annually.
What is new is enrollees’ interest in exploring a switch. Accenture predicts the rate of switching will likely continue to increase in the coming years due to three primary factors:
Even when they don’t switch, enrollees are exploring their options. Accenture found that 42 percent of Medicare beneficiaries like to shop for coverage, even if they don’t switch to another plan. This is likely due to a characteristic of the incoming Medicare population: they are savvy shoppers.
As we discussed in our paper, Baby Boomers Drive Health Plan Innovation, the Baby Boomer cohort is not a monolith. The population now aging into Medicare is what is known as the “trailing edge:” those born between 1956 and 1964. This group features characteristics that make them more informed and selective about coverage. According to Deloitte, many trailing-edge Boomers:
Another unique feature of this cohort: it includes more women who have been in the workforce and who have made their own decisions about health coverage vs. being covered via a spouse’s plan. Deloitte notes that “Increased workforce participation in earlier years of life also means that many women are eligible for Social Security and, thus, Medicare benefits, through their own work history.”
A study published by Johns Hopkins University Press found that “Women in the United States make approximately 80% of the health care decisions for their families.”
Women’s’ direct workforce experience will make them an even more powerful voice in vetting and selecting Medicare Advantage plans; they are also likely to apply budget-consciousness to the decision.
Accenture found that “Sixty-two percent of survey respondents who switched MA and MedSupp carriers in the past year did so because they did not believe they were offered good value for their money.”
Plan options were another key deciding factor.
Importantly, the customer experience issues (member experience, ease of doing business, knowledgeable representatives, and online services), when added together, come in third at 15%. In a competitive market, plans can address one of these pain points in the healthcare industry and make headway with one segment of “shoppers” by improving the customer experience.
Overall, these pro-shopping characteristics make the incoming, trailing-edge population unique in its priorities and needs. As Deloitte notes, “These differences will likely require health plans to develop strategies such as engaging with new partners, developing new services and communication strategies for members, and retooling materials and technologies to recruit and retain future MA members.”
At the nexus of all the pain points already discussed is enrollee and member communication.
Recruitment and member engagement needs to begin earlier, be more targeted, relevant and personalized, and have the flexibility to connect with a diverse audience in their preference of channel; strategies health plans are currently struggling to achieve.
In a Medicare Advantage Customer Satisfaction Study, JD Power found that “Member satisfaction with the information and communication from their Medicare Advantage plan has declined significantly (-16 points) from last year and is now the lowest-scoring factor in the overall health plan experience.” In many cases, this dissatisfaction stems from a failure of member education.
Healthcare analytics company, SPH Analytics, finds that “A surprising number of health plan members are not aware of the specific benefits, features, and requirements of their plan.” Nevertheless, the answer is not more of the same when it comes to the member communication and education tools plans are currently using.
Communicating plan benefits in a way that is accessible and easily understandable is a challenge for this industry. Visible Thread cautions, “Communicating in plain language is one of the most critical ways to build trust. But 86.6% of insurers are using complicated language, long sentences, passive voice and complex word density to communicate with Medicare's audience.”
While healthcare plans are rethinking how they communicate plan benefits to better engage members, they should also consider that the definition of engagement itself is shifting. Where engagement was once primarily thought of as outgoing communication to the member, a population that is more actively involved in managing their health and contributing patient-generated health data (PGHD) is interested in a relationship with their carrier that is more consistent, relevant, and designed to help them improve their health.
Health insurance research firm, Deft, has developed the concept of health plan “engage-ability, the characteristics that make a member most likely to “both stay with their carrier, as well as recommend the plan to their friends and family.”
Meeting members’ desire for a more personalized relationship is key to addressing another of the pain points in the healthcare industry: Treating chronic conditions.
The CDC estimates that 70 percent of all Medicare beneficiaries have at least one chronic condition and the HealthMine 2018-2019 Medicare Advantage Report survey of Medicare Advantage beneficiaries found that, “Few think their plan knows them well, with spotty personal communication about their chronic condition. The lack of perceived help in managing a chronic condition could present a huge opportunity for plans based on beneficiaries' needs and required CMS metrics and incentives.”
Healthcare plans are facing a new era in the treatment of chronic conditions due to what some are calling a tectonic shift in senior health care: the reinterpretation of allowed supplemental benefits by the Centers for Medicare and Medicaid Services (CMS) to include services that increase health and improve quality of life.
Blog Aging Options explains. Beginning in 2019, Medicare Advantage plans, “which already lure seniors with things traditional Medicare can’t cover, like eyeglasses, hearing aids and gym memberships — [were] free to add a long list of new benefits.”
Examples of coverage additions include adult day care programs, home health care aides to help with activities of daily living like bathing and dressing, palliative care at home for some patients, home safety devices and modifications like grab bars and wheelchair ramps, and transportation to medical appointments.
As with any tectonic shift, the ground has yet to settle in terms of how plans can incorporate these new benefits. Blog Healthpayer Intelligence reports, “despite wider parameters for supplemental benefits, plans have difficulty financing the changes. They are being asked to make new benefits for Medicare beneficiaries without receiving new funds. For many, this means reworking existing benefits to incorporate serious illness supplemental benefits instead of creating new benefits.”
Researchers at the Urban Institute conducted a series of interviews with Medicare Advantage insurers, health insurance experts, and social services providers about these changes. One of the study’s authors Lisa Skopec noted, “I think plans are interested and they want to be able to offer additional benefits that can help enrollees. But progress has been limited so far.”
Solving the riddle of how to incorporate—and pay for—these new benefits will be a challenge for Medicare Advantage looking for ways to attract new and switching enrollees. Making it clear up front which benefits will be available, in approachable language and available via the digital channels trailing-edge Boomers prefer, is an important first step for healthcare plans in addressing the pain points in the healthcare industry.