Changes in store for Medicare Advantage as open enrollment starts

By Tami Luhby, CNN

(CNN) — Attention, Medicare Advantage enrollees: It’s a good idea to review your plans during open enrollment, which begins Tuesday, so you don’t get caught by surprise next year.

Although the swiftly growing market remains stable overall, insurers are making a flurry of changes that could leave some senior citizens hunting for new policies, paying more out of pocket or getting skimpier supplemental benefits.

“In recent years, this is the most benefit disruption we’ve seen in the market,” said Lindsay Knable, a partner in consulting firm Oliver Wyman’s health and life sciences practice.

The shifts come as Medicare Advantage enrollment is expected to hit 35.7 million, or 51% of total Medicare enrollment. Under the Medicare Advantage program, which serves as an alternative to traditional Medicare, the federal government enters into contracts with private insurers to provide Medicare coverage to beneficiaries, many of whom are very cost-conscious since they are on fixed incomes.

However, few enrollees shop during open enrollment, which runs until December 7. Nearly two-thirds of Medicare Advantage participants did not compare their coverage with other options for 2022, according to a recent analysis by KFF, a health policy research organization.

Enrollees should look through their annual notice of change to learn what may be different for 2025, said Jeannie Fuglesten Biniek, an associate director of KFF’s Program on Medicare Policy.

“People just really have to pay attention to understand what they’re signing up for,” she said.

Terminated plans

This year, more than 1.8 million Medicare Advantage members, or roughly 8% of those in non-group, non-special needs plans, are enrolled in policies that won’t be offered in 2025, according to an Oliver Wyman analysis. About 1.3 million of them are currently enrolled in $0 premium plans.

They will have to actively select new plans, or they’ll be placed in traditional Medicare. By comparison, roughly 230,000 members, or about 1%, were in this situation for 2024.

Humana and Aetna are the most aggressive in trimming their offerings, with about 10% of their membership affected by the changes, according to David Windley, senior equity analyst at Jefferies. About 5% of enrollees in UnitedHealthcare and Centene policies will be affected.

Still, nearly all senior citizens will have a bevy of other options to choose from. On average, they’ll have 34 Medicare Advantage plans with drug coverage to choose from in their county for 2025, down from 36 this year, according to the Centers for Medicare and Medicaid Services. (These figures do not include special needs plans available only to enrollees in specific situations.)

“Offerings are stable, and people will continue to have ample, affordable choices in both [Medicare Advantage] and the Part D [drug plan] markets,” Dr. Meena Seshamani, director of the Center for Medicare, told reporters last month.

Plus, the average monthly plan premiums will decline to $17 next year, down $1.23 from this year, according to the agency. About 60% of enrollees who remain in their current plan will have a $0 premium in 2025, and the vast majority of members will have the same or lower premiums next year if they stay in their current plan.

Though it is discontinuing some plans, Aetna will still have policies accessible by 59 million Medicare-eligible beneficiaries, said David Whitrap, a spokesperson for the insurer. It will offer plans in 76 new counties next year.

“For 2025, Aetna is investing in markets where we can deliver competitive, high-quality, and affordable benefits in a manner that is sustainable for our business,” he said in an email.

Higher drug deductibles

Senior citizens will also have to check whether they’ll have to shoulder more out-of-pocket costs next year, particularly for medications.

This year, more than 16 million enrollees are in plans with no deductible for any drug, according to Greg Berger, a partner at Oliver Wyman.

But in 2025, more than 45% of these members will be subject to a deductible for at least some drugs, particularly brand-name or specialty medications, if they stay in the same plan.

About 36% of enrollees in Medicare Advantage with prescription drug coverage are in plans for which the drug deductibles will rise at least $200, according to Jefferies. Those in UnitedHealthcare and Aetna are most likely to be hit with higher deductibles. (The maximum drug deductible is $595.)

Some insurers are also cutting back on their allowances for dental, hearing and vision benefits. For instance, Aetna in slashing its allowance by more than $1,700 a year, on average, in its top 20 plans, while UnitedHealthcare is cutting it by just over $750 a year, on average, Windley said.

Likewise, Centene, Aetna and Humana are trimming their benefits that help seniors pay for over-the-counter medicine and provide flexible spending cards, which can be used to pay for other health-related expenses, he found.

Although many senior citizens focus on premiums when reviewing their options, they also need to check the other benefits and features of their Medicare Advantage options, said Mary Beth Donahue, CEO of Better Medicare Alliance, a Medicare Advantage advocacy and research group funded by insurers.

“The seniors and those guiding them in this process – the caregivers, family and aging organizations – really have to look at the full picture,” she said.

Multiple impacts

The changes stem from multiple legislative and regulatory changes to the Medicare Advantage program in recent years, as well as an increase in enrollees’ usage of health care services.

Critics have long said that Medicare Advantage insurers are being overpaid for the care and services they provide, arguing that many insurers designate some enrollees as sicker than people of similar health status in traditional Medicare in order to get higher payments from the federal government.

Over the last few years, the Biden administration has made several changes to the Medicare Advantage payment system, particularly to the measures that pertain to the health status of enrollees and the quality rating of the plans – both of which affect the overall payments that insurers receive. Also, some Covid-19 pandemic-era provisions that temporarily inflated the quality grade of the insurers’ plans have expired.

The result is that while the Centers for Medicare and Medicaid Services has increased the rates, insurers argue that the payments aren’t enough to cover their medical costs.

Also, Congress made major changes to Medicare’s drug benefit as part of the 2022 Inflation Reduction Act, which Democrats pushed through both chambers. Among the most notable provisions was an annual $2,000 limit on Medicare enrollees’ out-of-pocket prescription costs, which starts in January. However, the law requires insurers to be on the hook for more of the costs once enrollees hit the catastrophic coverage phase above the cap.

To help manage their increased liability from the redesigned drug benefit, some insurers are raising their deductibles and instituting other modifications to their drug coverage.

“You’ve got changes that are impacting revenues in a lot of different ways,” Knable said. “That’s requiring insurers to rethink what their product portfolios look like.”

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