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Medicare Compliance & Reimbursement

PART D:

5 Ways Part D Plans Are Positioning For New Business

Published on Sat Apr 01, 2006

New studies reveal what worked for PDP frontrunners in 2006.

Whether they offer a standalone prescription drug plan or a Medicare Advantage plan, the steps carriers take now to attract and keep hold of their Medicare Part D enrollees will be critical to their success in 2006 and beyond.

Although Part D is still gaining its legs, it's already clear which plans are achieving success offering the benefit. The Kaiser Family Foundation commissioned two new studies that reveal who the Part D frontrunners are and what they've done to position themselves for success. Here are five tips from the experts that plans are using to catch up, pull ahead and pave new ground in the PDP market.

1. Leveraging Brand Partnerships

The discount card program that many PDPs were involved in prior to Part D appeared to position those organizations well for 2006, notes Marsha Gold, Mathematica Policy Research senior fellow and author of the studies. Nine out of 10 firms offering national PDPs either offered a prescription drug discount card in 2004-2005 or partnered with a firm that did.

Discount drug cards gave plans a customer base that was easy to convert, plus access to a sales channel to do it, Gary Donner, MMC 20/20 principal, tells Eli.

"The discount cards were really just a warm-up act for most of the players," Avalere Health's senior vice president, Bob Atlas, tells Eli. No one expected the discount card business to generate significant revenue, he says. The real return on plans' investment in a discount card program was the ability to position themselves with organizations that would help secure significant Part D enrollment and ensure a smooth transition into the new benefit.

For example, UnitedHealthcare previously collaborated with AARP to offer a Medigap product and eventually took on AARP's discount card program. Now, in its continuing relationship with AARP, UnitedHealthcare is offering a national AARP-affiliated PDP.

In addition, organizations that offered a full suite of managed care products in addition to prescription drug coverage appear to be in a better position for success, notes Atlas.

2. Expanding Plan Offerings

Plans that have historically dominated the MA program expanded their offerings in 2006, according to Gold's studies. "Humana, UnitedHealthcare, PacifiCare (which recently merged with UnitedHealthcare) and Blues' affiliates seem poised to compete most aggressively on a national scale for new Medicare business in 2006," Gold finds. "Each is offering PDP and MA plans designed to appeal to a range of beneficiaries."

The good news is that within a particular region, it's not that hard to put together an array of PDP offerings, encourages Atlas. Pharmacy benefits management firms can enable a relatively small organization to be in business on a fairly large scale, he notes. Plus, there's a lot more interest in the local MA business than there was before the Medicare Modernization Act--in large part because the money has been quite generous. Increases to the MA plan capitation rate will reach nearly 25 percent by 2007, making it a financially attractive offering.

On the other hand, the private fee-for-service option might be much less viable. There's no network in a PFFS plan to speak of and little expectation in the way of utilization management, Atlas warns.

3. Defending Their Turf

New entrants may not see an upside in the supplemental market. But current players will need to stake out their territory and defend their turf, experts recommend.

Diversity among firms sponsoring PDPs and MA plans in 2006 is consistent with the existing Medicare supplemental market's complexity, finds Gold. Provisions in the MMA affect the individual private market (Medigap and MA), the group market (retiree health benefits) and Medicaid, creating both new opportunities for growth and risks to current lines of business. "Plans sponsoring PDPs and MA plans likely are doing so for a combination of proactive and defensive reasons," conjectures Gold.

Plans with an MA contract are viewing Part D as a business that will give them access to the Part C market. They can easily cross-market their Part C offerings to their Part D enrollees, suggests Donner. But keep an eye on the competition--plans that expect to compete with someone who perceives Part C as a substantial benefit had better offer a similar benefit, he adds.

4. Varying Marketing Strategies

To gain PDP enrollment, plans must make sure that their marketing strategy speaks directly to their target market segment.

"Advertising and direct marketing may be virtually irrelevant to a firm whose main goal is keeping its current membership base," notes Gold. "In addition to direct-to-consumer advertising--the traditional way to get new MA enrollment--firms also are developing exclusive and nonexclusive relationships with insurance agents and brokers and are leveraging relationships with pharmacies in 2006," she points out.

Partnerships may also associate a PDP with a well-known, trusted brand-name, Atlas says.

The UnitedHealthcare/AARP partnership, as well as partnerships with drugstores such as Kmart, Wal-Mart and Walgreens, are also deals to watch. In addition, keep an eye on national plans that didn't opt to do a lot of partnering--CIGNA, for instance. Instead of using partnerships to position itself for competition, CIGNA's strategy was to support its employer customers, including employer-group retirees. Coventry's national strategy was to leverage its brokering relationships with insurers in the Medigap business; this allowed them to add a layer of marketing that they may not have been able to build on their own as a primarily regional player.

5. Listening To The Experts

Not all of the organizations who got into the PDP market are likely to come out of it without at least a few scratches--especially those plans that do not have managed care experience. Experts warn that plans' startup and operating costs were probably greater than they had anticipated--plus, the Centers for Medicare & Medicaid Services continues to make extra demands that plans didn't budget for. Many plans also bid low in an attempt to secure more of the automatically enrolled dual eligible population. Risk adjusters, risk-sharing arrangements and reinsurance will help plans recover some of their losses, but the conservative betters are more likely to come out ahead. Insurers need to keep an ear to the ground--and watch for withdrawals and acquisitions to change the terrain going into 2007.

The ability for plans to operate extraordinarily smoothly, to be extremely responsive to members, and to be right far more than they're wrong is going to be absolutely pivotal, projects Atlas. Branding marketing will secure enrollment, but if plans can't provide good service and provide people with access to the medications they and their doctors feel they need, then they're not going to last, he warns.

To view the studies, visit www.kff.org/medicare/med031506pkg.cfm.

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