How Non-Profit Medicare Advantage Plans Can Improve Growth

As for-profit Medicare Advantage health plans rapidly expand across the nation and pick up a large share of the population’s enrollment, non-profit Medicare Advantage plans will have to adjust their strategies, a study from The Chartis Group emphasized.

The study relied upon Medicare Advantage data from CMS spanning January 2017 to January 2020 as well as fee-for-service Medicare data from 2014 to 2018.

“We believe it is imperative that non-profit health plans, both Blue and non-Blue, re-evaluate their growth strategy in Medicare Advantage to compete more effectively with the national for-profit plans and stop losing share,” the researchers stated.

“Non-profit plans must play to their strengths, capitalize on their competitive advantages, and deliberately plan for growth in new and innovative ways. At stake is one of the highest growth segments of the healthcare industry for the next decade.”

As the senior population grew by 3.5 percent each year, industry competition escalated for Medicare enrollees, the study found.

Medicare fee-for-service enrollment—while still claiming more than half of the Medicare population—has stagnated in growth while Medicare Advantage plans increased their enrollment from 16.7 million in 2017 to 22.1 million in 2020.

Non-profit Medicare Advantage health plans, however, have been left out of this trend. Enrollment in non-profit Medicare Advantage health plans that are not part of the Blue Cross Blue Shield Association inched upward from 4.1 million to 4.6 million over the last three years. In contrast, for-profit Medicare Advantage enrollment shot up from 10.3 million in 2017 to 15.1 million enrollees in 2020.

“Systematic growth in Medicare Advantage has suppressed the real story: Even though non-profit plans have seen growth — often while their commercial businesses have remained flat — their share of the market growth has waned, reflecting a deteriorating competitive position that may not be immediately evident,” the researchers argued.

The study identified five macro-level market characteristics that provide insight into the for-profit health plans’ growth.

First, for-profit Medicare Advantage health plans captialized on small senior markets. Whereas in large metropolis markets, for-profit Medicare Advantage plans saw less than 12 percent growth, they saw nearly 20 percent growth in micro-markets.

Meanwhile, non-profit Blues and non-profit, non-Blue Medicare Advantage plans lost market share in large metro areas and stagnated in smaller metro areas.

Second, for-profit health plans targeted high growth markets. Slightly over 65 percent of for-profit Medicare Advantage health plan enrollees (66 percent) were in moderate to high growth areas. In contrast, non-profit, non-Blue Medicare Advantage plans derived half of their enrollees from moderate to high growth areas.

Third, for-profit health plans positioned themselves in areas with low Medicare Advantage penetration. These plans had 78 percent of the market share in low penetration regions and 55 percent of the market share in high penetration regions.

Fourth, enrollment growth primarily occurred in markets with low total reimbursement.

“Enrollment growth is occurring in the lower reimbursing markets, with for-profit plans showing a clear preference for incremental enrollment growth in below-average PBPM markets,” the study explained. “Among non-profit plans, non-Blue plans show no clear preference, whereas Blue plan enrollment growth is concentrated almost entirely in low-reimbursement markets.”

Finally, as enrollment shifted away from being reimbursed at a discount of the fee-for-service Medicare rate, for-profits have maintained their positions in discounted areas, whereas non-profits lost their positions in these areas.

“Non-profit enrollment in discount markets has declined over this period, whereas for-profit plans have maintained their discounted enrollment and targeted growth in premium reimbursing markets,” the study stated.

The researchers proposed three strategies for non-profit health plans seeking to spur greater growth.

Non-profit Medicare Advantage health plans may readjust their consumer channels with the goal of increasing their access to seniors.

This effort will require building up community relationships, strategizing around retaining members as they turn 65, and targeting and better integrating dual eligible enrollment. Experts expect the integration of dual eligibles to be a major theme in 2021 for Medicare Advantage plans.

Non-profit Medicare Advantage health plans may also consider leveraging high-impact partnerships.

The researchers recommended using industry consolidation through mergers and acquisitions to increase growth. This may also have the added benefit of increasing for-profit payer exits from markets that non-profit Medicare Advantage plans are pursuing.

Also, high-impact partnerships with providers can be easier for local, non-profit health plans to develop than for sprawling for-profit plans, as Blue Cross experts have noted.

Lastly, non-profit Medicare Advantage health plans can build on economic advantages to increase growth. High quality of care, fueling savings through value-based care and advanced payment models, and unique benefits using CMS flexibilities can help set non-profit Medicare Advantage plans apart from the for-profit major payers.

“A vibrant health plan marketplace needs non-profit health plans to support competition and choice,” the researchers concluded. “Non-profit health plans, like non-profit health systems, are well aligned with seniors’ needs because of their long-term commitment to communities, local leadership, and charitable missions.”