Reform means change. The new Medical Loss Ratio (MLR) requirement of 80 percent for the individual and small business market as well as eighty five percent for big business coverage implemented by healthcare reform may have increasingly far-flung implications for a lot of insurers Benefits of Using.
Approximately forty seven million folks in the Country are enrolled in Medicare, and about twenty five percent of those people are enrolled in Medicare Advantage programs. These plans were hit hard by healthcare reform.
Beginning 2011, the federal government will substantially cut funding for MA plans to try and bring expenses in line with traditional Medicare. According to a recent government survey of Medicare Advantage insurers through the Energy and Commerce Committee,
Two-thirds of MA programs fall short of the newly mandatory 85 percent loss ratio, which means over fifteen percent of the company’s premium dollars went to earnings, advertising, along with other corporate and administrative expenses – not to medical expenses.
In contrast, ninety eight percent of traditional Medicare’s money is spent directly on medical care. As per committee chairman, Henry Waxman, “This report shows Medicare Advantage insurers are squandering billions of dollars on overhead costs – the truth is they spend ten times the amount per beneficiary as traditional Medicare.”
Issues in the 5-Star Rating System
Another trouble for MA insurers will be the Five-Star Rating System. Just a few years ago, this federal government began rating Medicare Advantage plans with a scale of 1 to 5, with five being the best. The system was produced to make it easier for Seniors to make more informed decisions.
Under healthcare reform, this rating system will be used to award bonuses to the best programs, and MA companies will have an incentive to shed areas with low satisfaction and high complaint ratios, spurring more dis-enrollments.
However the rating system means little, if anything, to most Seniors, who choose their Medicare Advantage plan determined by cost and access, not ratings. The overwhelming majority of MA members are not in highly rated plans because the plans are not obtainable in their areas, so bonuses make little sense and do not benefit Seniors. They only add into the cost of MA plans.
MA plans’ gross overspending and inability to meet the 85 percent MLR means many more Medicare Advantage insurers will continue leaving the marketplace as several have already. Meaning millions of Seniors can be turning back to Original Medicare and looking for a conventional Medicare Supplement.