MA plans on chopping block

Providers of Medicare Advantage and Part D plans: look out. Dozens of plans may soon be terminated.

Just as the Medicare Advantage quality bonus demonstration wraps up at the end of this year, the Centers for Medicare & Medicaid Services is going to start rejecting renewal of both MA and prescription drug plans that were rated with less than three stars for three consecutive years.

"CMS advises contracting organizations to examine their star rating performance history and assess their level of exposure to the risk of having CMS terminate their Medicare contract based on star ratings before the start of the 2015 contract year," regulators wrote in the 2015 MA and Part D final call letter. "It may be in the best interests of organizations and sponsors with 'at risk' contracts to consider electing to non-renew those contracts."

How many plans this change will affect isn't clear, but a slight thinning of the Medicare Advantage herd is certain.

Rating the plans

In the 2014 coverage year, 25 percent of Medicare Advantage plans were rated with three stars and four percent were rated with less than 2.5 stars, according to an analysis by Health Pocket. Only three percent scored at five stars, 15 percent scored at 4.5 stars, 20 percent at four stars and 33 percent at 3.5 stars.

Those four star plans attracted more than 40 percent of all MA-covered seniors this year, compared to just 28 percent in 2013, according to Health Pocket.

As for the two largest MA sponsors, UnitedHealth Group and Humana, only one may see some plans subject to nonrenewal, if 2014 ratings can carry the three-year averages.

This year, 40 percent of UnitedHealth's MA plans ranked at 3.5 stars, 39 percent ranked at three stars, 18 percent ranked at four stars, two percent ranked at 4.5 stars and 1 percent (just one plan) ranked at 2.5, according to Health Pocket. In 2014, Humana saw no plans rated below 3 stars: 50 percent were rated at 3.5 stars, 18 percent at four stars, 18 percent at 4.5 stars and 14 percent at three stars.

Across all plan sponsors, for the four percent with 2.5 stars or less facing nonrenewal, depending on their past history, CMS is offering a potential solution.

As an alternative, regulators wrote, "organizations and sponsors could explore whether it is allowable to consolidate membership currently enrolled in plans offered under low-performing contracts into other plans that will be offered during 2015 in the same service area under a different contract rated at three stars or better."

Still, that won't be possible for everyone.

"Dozens of plans are now dead men walking, including several of the publicly-traded Medicare plans and several Blue Cross/Blue Shield organizations," healthcare consultant John Gorman wrote in a blog about the MA final call letter. "So in a matter of weeks, a Hunger Games-style 'reaping' will occur that will change the face of this industry."

This story is based on a report appearing on Healthcare Payer News.