While it got off to a humiliating start, 8.1 million people ultimately enrolled in a healthcare plan through the Affordable Care Act’s (aka, “Obamacare”) state and federal health exchanges, surpassing the Department of Health and Human Services expectations for 2014. As impressive as this figure may be, enrollments are just one piece of a puzzle designed to get more healthy people into the health insurance system to help insurers spread medical costs across a larger base.
For the majority of the 8.1 people who enrolled through the health exchanges, Obamacare worked in their favor. It was a simple equation. When Medicaid expanded in 26 states millions of people who did not qualify for coverage suddenly became eligible for government-sponsored health benefits. For millions of other people, Obamacare is the cause of serious unintended consequences.
UnitedHealth Group Slashes Provider Network
UnitedHealth, the nation’s largest provider of Medicare Advantage plans is slashing its Medicare Advantage-approved physician network by thousands of doctors. The move is a direct response to the implementation of the Affordable Care Act.
Medicare Advantage plans provide the same basic health benefits as Medicare, but they also help fill in the coverage gaps and provide benefits that Traditional Medicare does not cover, like prescription drugs. Plus, unlike Traditional Medicare which does not limit out-of-pocket costs, Medicare Advantage has an annual maximum. It’s a commonly purchased plan that supplements and streamlines coverage for nearly a third of all Medicare beneficiaries.
Since the implementation of the ACA, Medicare Advantage became a thorn in UnitedHealth’s side. As the Obama administration expands Medicaid coverage it’s simultaneously reducing Medicare funding by slashing government-sponsored payments to health-benefit and healthcare provider. Specifically, the Obama administration hopes to cut up to $150 billion in Medicare payments to Medicare Advantage plans by 2024. That means that health insurers, like UnitedHealth, must respond by tightening their belt.
The Unintended Consequence
For several years Medicare Advantage insurers have known their per-capita reimbursements will decline and tough choices would need to be made. UnitedHealth had two options. They could increase premiums to offset the decrease in reimbursements, however this would likely force a large percentage of fixed income seniors to switch to a competing plan.
The other option UnitedHealth had was to remove the most expensive healthcare providers from its network, and that’s what they did. This will save the company money because network healthcare providers are reimbursed based on both cost and quality. By cutting the top providers, UnitedHealth can balance the requirements of both regulators and members.
UnitedHealth’s balancing act, while calculated, will become a big problem for those members who must now find a new primary care physician or specialist. For some members it will likely mean finding a new plan altogether.
UnitedHealth isn’t the only insurer affected by the hacking of Medicare Advantage plan reimbursements. In addition to UnitedHealth, Humana, Universal American, Health Net, and WellPoint all have significant exposure due to the percentage of their business vested in these health plans. As yet, none of the other four insurers have announced plans to cut their provider network to the same degree as UnitedHealth.
The Fight is Coming
When health insurers act together they have a lot of clout and the potential to stop the Centers for Medicare and Medicaid Services (CMS) from steamrolling them with annual Medicare cuts. You might remember how the CMS attempted to push through a 2.3% decrease in Medicare Advantage reimbursements in February of last year. The proposed decrease was met with a huge lobbying effort by the insurers, Congressional lawmakers, and insurance advocacy groups. The intense pressure caused the CMS to not only back down, but flip-flop and announce a 3.3% increase in reimbursements.
The reality of what’s likely to happen over the next few years will be found somewhere between the Obama administration’s pipe dream of $150 billion in Medicare Advantage cuts and heavy lobbying for increases in reimbursements. It’s yet to be seen how hard the CMS will hold the line on rate cuts or how health insurers will respond.