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Medicare Compliance & Reimbursement

HEALTH PLANS:

Insurers Scramble To Gain Part D Market Share

Published on Wed Jul 26, 2006

Last year's winners plan to cash in with expanded PFFS and MA plans.

Late last month, for the first time, the Centers for Medicare and Medicaid Services (CMS) released Part D enrollee data that broke down enrollees by type. For example, now you can find out not just Medicare Advantage (MA) enrollment but how many of those enrollees also have Part D in their MA.

The three major takeaways from the data are: 1) the big players, namely United Health Care and Humana, have the largest market share; 2) private fee-for-service (PFFS) plan enrollment has surged since December; and 3) regional PPOs are not catching on as fast as projected, according to Bob Atlas, senior vice president at Avalere Health.

As insurers gear up for the second round of the Part D market grab, be prepared for these trends to emerge:

More PFFS players. "There is certainly an indication that other insurers are going to start to address the market with a PFFS offering," says Atlas. Although statutorily authorized by the Balanced Budget Act of 1997, PFFS plans had a slow start, with the first contract awarded in 2001. As recently as last September, only about 150,000 lives were in PFFS plans. That number has blossomed to more than 763,000. PFFS plans are particularly attractive to employers looking to move out of traditional Medicare wrap-around schemes, because they put the retiree in the MA world, without the restraints of managed care, asserts Atlas.

Upsell to MA plans. Humana, with the largest footprint of any MA plan, will profit handsomely if they can convert prescription drug plan (PDP) enrollees to an MA plan. The profit potential is staggering: the average annual revenue for a current life for a PDP is $1,500, whereas it approaches $11,000 for MA plans that include the Part D benefit, says Atlas. He expects Humana and other insurers with large Part D shares to adjust their broker commissions to fill up their most profitable plans. Translation: The big players will get bigger.

Bad news for low-ballers. Those companies either looking to get in big this year or gain share through low-ball bids for dual eligibles have to re-think their strategy. CMS used their demonstration authority and chose not to weight the benchmark premium averages for dual eligibles, as was prescribed by law. CMS became concerned that too many benes would have to change plans due to bidding wars. So the plans that got the benes the first year get to keep them by meeting the (higher) unweighted benchmark.

More investment in special needs plans (SNPs). Insurers created nearly 300 SNPs for 2006. About 450,000 benes went into them, Atlas estimates. Several states are pushing Medicaid eligibles into SNPs and companies wanting a stronger MA presence are likely to create more of them.

Acquisitions. What's a big player on the lower rungs of the Part D enrollment ladder to do to make big gains in market share? There's always acquisition. Consolidation is inevitable, and those with the deepest pockets and desire for national penetration are in the best position to spend the bucks.

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