With the Health Insurance Marketplace set to launch October 1st and other major pieces of healthcare reform (Affordability and Accountability Act or “ACA”) set to go into effect January 1st, CSG Actuarial felt it would be another good time to discuss the impact ACA has on the senior health marketplace.

Overall, the Medicare Supplement market is largely unaffected by ACA, with most of the possible impact coming indirectly from changes to Medicare Advantage.  An overview of the possible impacts to Medicare Supplement are below:

Medicare Supplement

  • Largely Unaffected by ACA
  • Section 3210 of ACA required the NAIC to add nominal cost sharing to plans C and F
  • After more than 20 months of considering this requirement, NAIC wrote a letter to Health and Human Services Director Kathleen Sebelius in December 2012 in which they recommended no cost sharing to plans C and F due to lack of evidence that doing so would decrease utilization
  • The NAIC received a response letter from Kathleen Sebelius on May 28th, 2013 accepting the proposal of no changes to plans C and F

Perspective from CSG Actuarial:  Medicare Supplement seems to have dodged any real direct impacts from ACA, especially if Plan F doesn’t change.  The Medicare Supplement market continues to grow, CSG Actuarial doesn’t expect ACA to have any impact on slowing that growth.

Medicare Advantage

ACA includes some changes to the Medicare Advantage program that could indirectly impact the Medicare Supplement market, such as:

  • Beginning in 2014, Medicare Advantage plans will be held to a minimum loss ratio of 85%
  • Requires restructuring the funding levels to Medicare Advantage plans in order to reduce payments closer to traditional Medicare (i.e. remove the 14% “overpayment” to Medicare Advantage)

            1)  CBO estimates this will cut $145 billion over 10 years

           2)  The payment restructuring was designed to be implemented over 3-6 years beginning in 2011

  • However, in 2012 CMS expanded “quality” payments to Medicare Advantage plans through a demonstration program (outside of ACA) that effectively mitigated most of the impact of the Medicare Advantage funding cuts from ACA.  The demonstration program is targeted to continue through 2014, at which time the additional bonus payments will end unless other measures are put in place.

Perspective from CSG Actuarial:  Ongoing funding levels for the Medicare Advantage program will be a political hot button for many years to come, regardless of what changes are implemented or not implemented as part of ACA.  A reduction in funding levels to Medicare Advantage would likely lead to an increase in premiums, reduction in benefits, or both.   CSG Actuarial expects the Medicare Advantage program to continue growing into the future, with the 85% minimum loss ratio driving consolidation within the market.

Bottom Line Impact to Medicare Supplement

It appears that the Medicare Supplement market is going to end up in a better place after ACA.  The Medicare Supplement plans are not impacted by minimum loss ratio changes or major plan changes from ACA while the Medicare Advantage market is headed towards higher minimum loss ratio requirements and continued political pressure on funding levels.

CSG Actuarial will continue to monitor the regulatory environment and report on any changes when necessary.

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Sources:

Henry J. Kaiser Family Foundation website.

http://kaiserfamilyfoundation.files.wordpress.com/2013/01/8257.pdf
http://kaiserfamilyfoundation.files.wordpress.com/2011/04/8061-021.pdf

NAIC letter to HHS:

http://www.naic.org/documents/committees_b_sitf_medigap_ppaca_sg_121219_sebelius_letter_final.pdf