Triple V: Planning Victory on Valentines Day in Vegas
2023 is the most consequential Medicare Annual Election Period on record in the most intriguing health care town in the country. And it all came together months ago.
TL:DR Understanding the inputs and outputs of Medicare Advantage (MA) Plan benefit strategy can be useful to entrepreneurs who design analytics, technology and services to improve patient outcomes for MA Plan members. It is particularly interesting to evaluate Las Vegas 2023 as a case study given the level of competition in the market and the prevalence of fully capitated primary care medical groups (PCPs). The Las Vegas market offers a window into the future as value-based payment between MA Plans and PCPs expands nation-wide.
Why Las Vegas is the most interesting Medicare Advantage Market in the US.
First, the sheer size, growth and competition of the Medicare Advantage market makes Las Vegas a city to watch. Las Vegas is the largest metro area in Clark County, NV. With almost 80,000 MA enrollees, Clark County is the #1 ranked market in the US outside of California in terms of MA enrollment, and membership has grown over 9% in each of the last 3 calendar years. As of 2022, 52% of all Medicare beneficiaries in Clark County choose Medicare Advantage, compared to 47% nationally.1 Below is a snapshot from Chartis' Medicare Advantage dashboard that shows the market share in the state of Nevada. You can see that United Healthcare (UHC) and Humana dominate the market, but CVS/Aetna has grown quickly in the last 3 years.
Second, Las Vegas is home to medical groups who employ experts who know how to provide team-based comprehensive primary care in clinics focused on older adults. The prevalence of full-risk, Medicare-focused primary care medical groups in the city is unmatched in the US outside of California and South Florida. Optum Care (formerly Southwest Medical), Caremore (part of Elevance), Intermountain Medical Group (formerly HealthCare Partners of NV), Centerwell (a division of Humana), Cano Health, VillageMD (majority-owned by Walgreens) and others all operate population health-enabled, team-based models of care that are explicitly focused to address the health and wellbeing needs of older adults in the city. This level of care is possible, in part, because of the prevalence of full-risk contracts with Medicare Advantage Plans in the area. As a result, Health Plan and Provider Group work very closely together to improve outcomes for their respective patients/members. On the people side, it is notable that Las Vegas is the clinical and technology birthplace of Iora Health. While Iora won recent attention with its acquisition by OneMedical in 2021, one of Iora’s most impactful contributions was demonstrating as far back as 2014 that tightly aligned teams and technology could drive meaningful outcomes in complex patient populations. These ideas and passionate people spread not only city-wide, but throughout the country.2
The photo above from an article in The Atlantic shows my former Iora Health colleague and Health Coach, Glendalee and one of the Culinary Extra Clinic’s beloved patients.
How did Medicare Advantage product decisions come together ahead of 2023 open enrollment in Vegas?
To help illustrate how the MA benefits strategy process works, below a fictional insurer “Silver Fox Health Plan” is featured in a real-life set of circumstances in Clark County, NV in February 2022.
To set the stage, it is Valentines Day, Monday, February 14, 2022 in Las Vegas, NV at 7:30am PT. The office is still closed due to COVID, thus a large team of executives at Silver Fox Health Plan (Silver Fox) responsible for the company’s Nevada market are huddled together on a Zoom call from their homes in and around the city. Colleagues in Actuarial, Finance, Sales, Marketing, Network, Quality, Provider Engagement, Operations and Strategy are in attendance. National MA executives from headquarters are also present, which is unusual. Powerpoint presentations and Excel spreadsheets filled with internal projections, competitive intelligence, and 3rd party models consume dozens of available-to-be-toggled windows on each computer screen. The Microsoft Teams chat has been active for 15 minutes already and the mood in the virtual room is tense. But not because attendees are late to book their favorite off-Strip dinner reservation tonight.
The MA bid strategy sessions that heat up in February across the country launch Medicare Advantage’s most important annual business process. But looking ahead to 2023, the stakes this year are dramatically different for Silver Fox in Las Vegas and it has big decisions ahead. Does it steadily improve benefit structure and bet that Sales & Marketing distribution will outgrow peers while maintaining its medical loss ratio (MLR)? Or does it reinvest potential margin back in the form of dramatically more robust benefits and create new products so as to attract members in such a way that ices out its competition? What level of investment, and margin impact, will investors tolerate? To what degree can that investment be absorbed by Silver Fox’s fully capitated primary care physician group partners who are much more sensitive to unexpected volume increases and subsequent MLR spikes? The answers to these questions shape the animated discussion in Silver Fox’s virtual room for the next 8 hours.
Strategic Considerations for Silver Fox Health Plan
While strategic options for 2023 bid design had been discussed by Silver Fox since Halloween 2021, by February market-wide enrollment data were now available via Centers for Medicare & Medicaid (CMS) filings. Historically, MA Plans in Las Vegas have been rewarded with a strategy featuring stable year-over-year benefit designs, robust sales and marketing, and strong alignment with fully capitated PCPs. Silver Fox Health Plan had to consider whether the market was shifting in ways that required a new strategy.
First, market growth continued to be strong, but consumer preferences were shifting to new products3
While annual growth in the market was consistently almost double digits, the concentration of that growth was shifting outside of the Medicare Annual Election Period (AEP). In Las Vegas, AEP growth decelerated from 5.0% in 2020 to 3.7% in 2022.
Non-AEP growth was accelerating in part due to growth in products that could be purchased all year round such as Dual Special Needs Plans or D-SNPs.
While MA members in Las Vegas historically were concentrated in HMO products, PPOs were becoming increasingly popular. For perspective, over the past 2 years, PPO membership increased 47% compared to 14% for HMO.
Second, competition was heating up from new entrants with unique value propositions and market leaders were not expected to sit and watch
As is visible in the Chartis graph above, CVS had been aggressive over the last few years. This is particularly notable when considering the possibility of CVS better connecting its Aetna insurance business with its retail pharmacy presence.
Focused, clinically-enabled MA Plans recently entered the market, notably non-profit SCAN and startup Alignment Healthcare. Both organizations built their businesses with deep focus on population health and partnerships with progressive PCPs, and executives in each organization had significant prior experience in the Las Vegas market.
These focused MA Plans used disruptive benefit designs to take share from incumbents. Notably, both SCAN and Alignment used new “Give Back” benefit designs so as to attract shopping. For consumers interested in low premiums, this product was even more attractive than a $0 premium product in that it gave $$ back to enrollees to offset the Part B premium beneficiaries pay to CMS4. The introduction of these products was effective. In just two open enrollments, Alignment grew to almost 2,000 members and SCAN grew to almost 1,000 members in only 1 AEP.
Other organizations’ differentiating strengths made them worth watching. Centene’s influence in Medicaid made them very credible in the D-SNP Market, and SelectHealth’s integration with sister company Intermountain Medical Group offered access to members with deep ties to those PCPs.
And while growth rates were decelerating, both Humana and AARP-branded UHC were expanding in large absolute numbers each year, each with the brand, network, distribution, and product portfolio advantages that smaller organizations could not match.
Third, the expansion of the risk-bearing PCP market in Las Vegas enabled new risks and opportunities
Historically risk-bearing PCPs in Las Vegas aligned with specific MA Plans, which allowed for better care coordination and greater consumer participation in important benefits that saved money and improved well-being for members. This kind of coordination was popular with consumers, and contributed to MA Plan growth. However, this market changed in 2018 when Optum, a unit of United Health Group, acquired Healthcare Partners from Davita. The FTC refused to allow the deal to go through with the Nevada business, which was ultimately was purchased by Intermountain Healthcare. With more recent entrants like Cano Health and Centerwell tightly aligned with Humana, and Elevance’s ownership of Caremore, by 2022 risk bearing PCPs are more evenly distributed across MA Plans than ever before.
These PCP groups historically took more risk on HMO products as opposed to PPO. While medical group contracts in HMO products might be paid in a global capitation arrangement (which means that the provider is responsible for 100% of the medical costs incurred by its patients), the PPO contracts may be upside-only or limited downside. This contractual difference exists because HMO products can offer more referral and network control than PPO products, where utilization patterns were more influenced by specialists and hospitals. As PPO membership expands, adverse MLR performance affects the MA plans bottom line more so than an HMO.
Risk-bearing PCPs’ financials are very sensitive to the plan design decisions. If an MA Plan decided to get aggressive in its HMO benefit design in order to drive growth, the MLR and operational cost impact associated with that decision would largely accrue to the risk bearing PCP. This can be destabilizing. A significant negative impact could have contractual considerations for the PCP/Plan, which would jeopardize partnerships that were so critical to the performance of the MA Plan’s growth and medical management.
Fourth, there was early evidence that certain market participants might make big investments in 2023 benefit design, while others might be cautious
Humana, under pressure from investors, announced a major refocus on growth after a disappointing 2022 AEP relative to its biggest rival. With this pressure, and available Star Rating bonuses with which it could reinvest into benefits in ways competitors could not, it was reasonable to conclude that Humana could make big investments in 2023.
Aetna’s response to their competitive position was less clear. After a few years of rapid growth, investor pressure on earnings, and a less robust Star Rating program, they may be reticent to make a big bet that further puts pressure on earnings.
SCAN and Alignment Healthcare’s confidence, coupled with their growth mandates, would make them inclined to be aggressive. The question was whether they would add even more benefits to the “Give Back” $0 HMO products, or add new products, or both. With their strong medical management focus and PCP partners as mechanisms to limit MLR impact, those might be reasonable bets.
With HealthCare Partners of NV fully integrated into its new parent, Intermountain, it would be reasonable to assume that its insurance sister company, SelectHealth, would continue to be aggressive to build its emerging presence in the market, particularly given its market-leading 5-Star status.
Centene and Elevance would also likely look to make bets that complement their respective competitive advantages in Medicaid lines of business and PPOs, but both were less focused on their Medicare Advantage businesses nationwide than other insurers in Las Vegas.
UHC had a bonus award from its 4.5 Star status that it could invest in 2023 benefits. If Star Ratings were likely to be troubled for bonus year 2024 given the impact Covid had in engaging members, this might be THE year that UHC shifts its playbook with a more aggressively positioned set of products in its already market-leading distribution base. UHC also had the most to gain (and most to lose) if the financial implications of excess growth were passed on to its Optum partner.
How Silver Fox’s competitors responded to the strategic context
Product design decisions were finalized between February and June, when bids are formally filed with CMS. When CMS published the list of available products on October 1, 2022, it was possible to analyze how competitors in Las Vegas behaved relative to the strategic inputs in front of them. The market appeared to behave as expected.
PPOs and D-SNP products were launched/enhanced to take advantage of the cyclical shift in consumer patterns
D-SNP growth. Buoyed by the sales trend outside of AEP, Alignment and Molina launched new D-SNPs and UHC took the opportunity to make its D-SNP very attractive. This product has enjoyed faster membership growth than the overall market, and by investing in these offerings now, these organizations provide their distribution partners a product that can be effectively purchased all year long.5
PPOs investment. SelectHealth launched their first PPO product and Humana made improvements in their PPO relative to 2022. Aetna, on the other hand, shifted its growth-oriented benefit strategy and increased the out-of-pocket maximum in the PPO, and deployed those dollars into improved supplemental benefits.
Competition expanded. The number of companies and products available increased and established companies made investments in novel product strategies
A new company entered the market. Molina, another Medicaid-focused organization, entered the market with a range of HMOs and a D-SNPs offering.
The Part B Give Back product was again a big story. While in previous years it was Alignment and SCAN who created the disruption with generous rebate designs, this year it was Humana’s turn. Humana doubled its Give Back from $50/month to $100/month in a move that will likely be very enticing for shoppers.
Most MA Plans invested in the core HMO product and dominant players were aggressive in defending their position
Health Plans added benefits and new options in the flagship $0 premium HMO product category, which historically has been the most popular. SCAN and Aetna introduced additional $0 premium HMOs to their 2023 lineup while both UHC and Alignment Health decreased the out-of-pocket maximum for medical services, which is one of the most important dollar amounts that older adults weigh in their plan selection decisions.
Across their entire product portfolios, Humana and UHC each positioned their benefits very attractively so as to protect their position.
Who will the 2023 winners be?
Ultimately those of us in the public domain won’t know until well into 2023 whether the product strategies in Las Vegas drove the retention, growth, and margin goals favorably vs. targets.
But the MA Plans already know. For example, Humana was able to confidently share its 2023 enrollment guidance with Wall Street in their earnings call on November 3, only two weeks into the 2023 annual election period. How do the insurers do this? MA Plans have a few key tools at their disposal. First, they have sophisticated software tools such as Milliman’s MACVAT that analyzes the actuarial value of all of the benefits inputs to each product submitted to CMS. For 2023, these insights are available on October 1, 2022. Second, MA Plans track daily sales and marketing enrollment data relative to prior years and relative to expectations, and sources/demographics of those enrollments. Third, insurance actuarial teams have detailed models informed by years of prior data and future medical trend predictions so as to estimate the degree to which the enrollment numbers will positively/negatively impact MLR relative to projections.
The risk-bearing providers may or may not know. Given the importance of the link between Health Plan and Provider Group in Las Vegas, those MA Plans that are most effective at addressing with their partners unexpectedly faster or slower growth will be best positioned in the long run. This kind of partnership and transparency is important, but counter cultural and strategically tricky when considering the parent of one PCP Group may compete with an insurer with whom that group is contracted.
How can health tech and technology-enabled services companies help Plans and PCPs in Vegas?
If the MA Plans already know how they are going to perform relative to 2023 objectives, then they are already making decisions to address contingencies related to
addressing the medical loss ratio issues that come from growing in excess of expectations
taking initiatives to accelerate growth outside of AEP
supporting their PCP partners who did not expect higher enrollment
These contingency plans are opportunities for entrepreneurs with solutions that help improve visibility, access, outcomes and growth - either for MA Plans or directly for risk-bearing PCP groups. Timing is important however.
Does that mean entrepreneurs should think about bringing boxes of heart shaped, chocolate-covered bacon alongside a slick sales deck for Silver Fox executives around Valentines Day 2023? As sweet as that idea sounds, starting a sales process in February is likely too late to address 2024 performance.
This is disheartening but important to understand. To that end, in our next post we will unpack the Medicare Advantage purchasing process so that entrepreneurs can build targeted solutions that can improve outcomes faster and organize a more helpful sales process for those MA executives who would love to accelerate innovation.
https://www.chartis.com/insights/medicare-advantage-ma-competitive-enrollment-dashboard
The physician trainees who rotated through Iora in Las Vegas over the years is a who’s who of population health innovation and leadership
https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MCRAdvPartDEnrolData/Monthly-MA-Enrollment-by-State-County-Contract
https://www.healthcaredive.com/news/smaller-rivals-snap-up-medicare-advantage-members/617819/
https://www.kff.org/medicare/issue-brief/medicare-advantage-in-2022-enrollment-update-and-key-trends/