Effective January 1, 2019, federal legislation requires all health care payers offering Medicare Cost plans to discontinue plans in service areas where at least two competing Medicare Advantage plans meeting specific enrollment thresholds are available. Below we outline what Medicare Cost Plans are, and how sun-setting these plans may impact the Medicare market.
What are Medicare Cost Plans?
Medicare Cost Plans are operated by an HMO (Health Maintenance Organization), and are not Medicare Advantage plans. Major differences between Medicare Cost Plans and Medicare Advantage plans include:
- Individuals may enroll in Cost Plans whether they have Medicare Part A and Part B, or Part B only. Medicare Advantage requires enrollment in both Parts A and B.
- Enrollees can receive covered Medicare services from providers outside of the plan’s network.
- Cost Plans may include prescription drug coverage. For plans that do not include drug coverage, Cost Plan enrollees may enroll in a Part D plan.
- Individuals can enroll at any time the Cost Plan is accepting new members.
- Individuals can leave Cost Plans at any time and return to Original Medicare.
Medicare Cost Plan Sunset
Under the Social Security Act (section 1876 (h)(5)), CMS will not accept new Cost Plan contracts. Additionally, CMS will not renew Cost Plans contracts in service areas where at least two competing Medicare Advantage plans meeting specified enrollment thresholds are available. Enrollment requirements are assessed over the course of a year. In 2016, CMS began issuing notices of non-renewal to Cost Plans impacted by competition requirements. Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) provided affected Cost Plans a two-year period to transition to Medicare Advantage. This allows impacted Cost Plans to continue to be offered until the end of 2018, but only if the organization converts into a Medicare Advantage plan. Existing Cost Plans that have been renewed may submit applications to CMS to expand service areas.
Impact on the Market
As of June 2017, there are approximately 700,000 Cost Plan enrollees across the nation. Almost 400,000 of these enrollees reside in Minnesota, with nearly 180,000 of these individuals in the Twin Cities region. If the Cost Plan enrollee is eligible for Medicare Advantage, the individual may elect to enroll in the Medicare Advantage plan the Cost Plan converts into. The beneficiary does have the option to discontinue or change the Medicare Advantage plan after the deemed enrollment.
We will continue to monitor Cost Plan news and post updates as they become available.
Medicare Part C Division of Policy, Analysis, and Planning (DPAP) – https://dpap.lmi.org/DPAPMailbox/Documents/FAQs_August%202016.pdf
H.R.2 – Medicare Access and CHIP Reauthorization Act of 2015 – https://www.congress.gov/bill/114th-congress/house-bill/2