Medicare AEP Hangover in Las Vegas
The 2023 Medicare Annual Election Period results are now available, putting 2024 planning into a full motion in Clark County, NV.
In late January1 the CMS made available the membership data for each plan that revealed Annual Election Period (AEP) gains & losses. In Clark County, Nevada, the home of Fabulous Las Vegas, the outcome of the plan design and sales/marketing decisions had three important storylines: 1) The recent share gain acceleration by new Medicare Advantage (MA) players was stopped in its tracks, 2) Humana grew by the largest number of members in recent memory, and 3) County AEP growth continued to decelerate. Bets were won and lost, but there is no time to sleep off the AEP hangover. Time to focus entirely on 2024!
The Las Vegas Context
Medicare Advantage is very complicated, and I have found it much easier to understand by looking at the competitive decisions made by the MA plans in each county. In an earlier post previewing MA AEP, I wrote how Clark County was a county to watch given the shifting demographic trends, the size and growth of the market, and prevalence and growth of risk bearing medical groups.
If you read that piece, you will recall that there were three big question marks for 2023 AEP:
To what degree MA growth rates would continue. MA growth during AEP decelerated the past 3 years, and this has implications for plan design as well as sales & marketing allocation decisions in rest-of-year selling vs. in AEP.
Whether newer entrants would continue to take market share. The new entrants would continue to take share from United Healthcare & Humana, the two organizations who historically dominated the market.
To what degree would any major move by any one plan would destabilize PCP relationships that are so important to MA competitive positioning in the market
With the data in, three big stories emerged.
Story #1 - the recent market share gains by competitors to UHC & Humana stopped.
The organizations who had taken share over the last several years from United Healthcare (UHC) and Humana, were not able to continue to do so in AEP 2023.
The membership gains in 2023 in Clark County were entirely by the dominant players and for the first time in almost a decade, market concentration as of January 1 increased.
Story #2 - Humana’s growth was its biggest in over a decade
In 2022, it was widely reported that Humana was under significant pressure from investors and an activist-led board demanding better growth performance. The hypothesis was that 2023 AEP would demonstrate a big turn around, and Humana was very public about its $1 billion investment to ensure this would happen. In the February 1, 2023 earnings call, Humana shared that 1) the organization invested closer to $1.1-$1.15B and 2) they grew 494k lives in AEP, more than 3 times 2022.
Las Vegas represented one of those local communities where Humana had a banner year. And yes, you might be saying, ~5,000 members is a drop in a bucket for an organization as large as Humana, and only 1% of the total AEP growth nationwide. To some extent this is true, but keep in mind this is 1% from just one county! For perspective, below is Humana’s growth in the last 10 AEPs in Clark County, NV.
2023 AEP was Humana’s biggest growth year in over a decade in both absolute and percentage terms.
What drove this surge? The plan design decisions Humana made appear to have played a significant role. In particular, the decision to double the Part B rebate from $50-$100 appears to have been particularly attractive to prospective members as membership CMS reported in this plan picked up significant membership.
Story #3 - MA AEP growth in Clark County continues to decelerate
Coming off a 10-year high in 2020, and continuing the deceleration trend that shaped 2023 bid strategy, AEP sales continued to dip, particularly in percentage terms. AEP Growth in 2023 in Clark County was the lowest in over a decade.
The Hangover effects of these AEP outcomes
There are some opportunities/challenges to watch in Las Vegas as both Medicare Advantage plans and their PCP partners cater mobile IVs into their office parks ahead of imminent 2024 planning sessions.
Will the efforts by UHC and Humana to defend their position keep the competition at bay in 2024? Or will SCAN, Alignment, CVS/Aetna, SelectHealth, Centene and others come up with other product design/portfolio strategies to outfox the market leaders?
How much operational and economic pressure is the Humana membership growth putting on its owned & partnered risk-based PCP clinics as well as Humana itself?
Access & operations. Presumably this is a growth tailwind for Humana-owned Centerwell and Humana-contracted Intermountain Medical Group, but at the same time this dynamic could cause access challenges if the medical group had not planned for such large numbers of new patients.
Economics. A big influx of unplanned new members can cause medical loss ratio, and therefore profitability, challenges for both globally capitated medical groups as well as Humana itself in 3 ways:
the volume of new patients makes it difficult to provide access to care that these patients need and as a result they are more likely to go to the ER or experience more transactional care
the patients switch in from traditional Medicare are un-managed
the patients sign up for a plan like the Part B Give Back that has less attractive early year economics
Interestingly each of these issues were explicitly discussed by CFO Susan Diamond in Humana’ Earnings call on 2/1/23. Here she is speaking about the impact of stronger than expected growth and the Part B Giveback plan - both were key storylines in 2023 AEP in Clark County.
Will the bets made on Dual Special Needs Plans (D-SNP) and rest of year age-in sales continue to drive the growth in the market outside of AEP? As discussed in November’s post, several organizations have been making gains during this non-AEP period, and this shift in shopping behavior attracted those dual-eligible products that can be sold all year round from both existing organizations and new entrants. If strong enrollment trends persist in early 2023, this growth will offset disappointing AEP numbers and possibly even shift marketing/sales budgets away from AEP 2024.
What other game-theory questions will dominate the board room on Valentine’s Day 2023?
If Humana’s growth was dramatically over plan, will they be forced to be more conservative in 2024 bid planning, offering a window for others? If earnings are pressured nationally from the big 2023 AEP gains, could that influence local leaders’ decisions in Clark County?
In Clark County, one of CVS/Aetna’s plans had the largest new enrollment of any specific plan, but as an organization overall the company lost membership. It appears that the plan gains were the result of a strategy to shift members from one plan to another. Perhaps for Star Ratings purposes? Irrespective of the reason for the shift, will the action CVS/Aetna took have implications in the broker community that will offer opportunities for other MA plans to closely partner with brokers?
Will the CMS proposed changes in Star Ratings favor certain plans quality management orientation over others? Does this give a financial advantage for those plans who are confident they can outperform their peers?
On January 31 and February 1, respectively, CMS issued guidance on RADV audits and released its 2024 Advance Rate Notice Letter. We now know that RADV payments will be required going back to 2018 (unless the plans successfully sue CMS from making this change) and rate increases will be substantially lower than 2023. Meanwhile, more regulatory-driven impacts to administrative costs are coming: risk adjustment and marketing compliance infrastructure and requirements to address Utilization Management/Prior Authorization laws that go into effect in <3 years. To what degree do these financial pressures force certain plans vs. others to be more conservative in 2024 plan designs? And does all this favor the market share leaders or a differentiated new entrant?
To what degree can the strategy, operational teams & and provider development teams design the quality, care management, utilization management, and value-based payment programs necessary to mitigate risks from top line pressures and new membership challenges?
We won’t really find out many of these answers until October 1 when plans are published, but we do know with certainty that this will likely be an even more consequential bid planning season that Las Vegas has ever seen. If your loved one works in health insurance, Valentines Day may be less sweet.
And yes, I know I promised to write a post about how to navigate these predictable cycles as an entrepreneur looking to support MA plans. Stay tuned. Working on it!
https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MCRAdvPartDEnrolData