In her two decades as practice manager at Bridgeport’s Nephrology Associates, Cindy Lovejoy never imagined she would see such a big piece of the dialysis center’s business instantly vaporize.
But that’s what happened in October when United Healthcare jettisoned Lovejoy’s employer — and more than 2,200 other Connecticut doctors — from its Medicare Advantage network.
“We see hundreds of these patients,” Lovejoy said. “Where are they going to go?”
United Healthcare’s decision to cut 19 percent of its Medicare Advantage network in Connecticut shocked doctors and state officials alike.
Physician associations in Hartford and Fairfield counties filed suit against the insurer Nov. 6, and the state’s attorney general and Congressional delegation have also demanded answers.
While that plays out, doctors are worried other insurers might cut providers too.
Some experts say it’s a possibility.
For years, privately run health plans for seniors were a cash cow to insurers; but the Medicare Advantage market faces significant change and funding cuts, largely a result of federal health care reform.
Sheryl Skolnick, a health care analyst with CRT Capital Markets in Stamford, estimates that the Affordable Care Act, or Obamacare, will result in a 4-percent decline in Medicare Advantage payments to insurers in 2014 compared to 2013.
Legally limited by how much of that financial impact they can pass on to beneficiaries, insurers face few options, Skolnick said.
“This is a tried and true strategy,” Skolnick said. “When rates go against you, the first thing you do is shrink lives and providers.”
United Healthcare is doing just that, she said. And not just in Connecticut. Similar reports of network culling have surfaced in Rhode Island, New York, Florida, New Jersey and Ohio. The insurance giant may cut up to 20 percent of its Medicare Advantage providers across the country, reports say.
The move, however, shouldn’t be all that surprising. United Healthcare has warned investors in recent quarters that it was considering a number of actions—tightening medical and operating costs, changing provider networks and contracts, and adjusting member benefits—to offset anticipated rate reductions in its $43-billion Medicare business.
Could others follow?
United Healthcare isn’t alone with the uncertainty over its Medicare Advantage future. Other insurers haven’t publicized provider cuts, but they have alluded to pressures they’re facing.
Aetna’s Medicare Advantage business is about three times smaller than United’s 3 million covered lives, but the Hartford insurer is weighing its options so it can continue to profitably manage that 4 percent of its customer population, which is growing fast and represented 29 percent of its premium revenue in the third quarter.
Aetna CEO Mark Bertolini said during a call with analysts late last month that the Medicare funding gap the company anticipates in 2014 is the largest it’s ever faced.
Nancy Cocozza, president of Aetna’s Medicare business, said she isn’t sure if the insurer will make cuts to its provider network.
“It’s hard to say,” Cocozza said. “We’re constantly looking at our landscape of providers who collaborate well with us.”
Cocozza said Aetna will refine its network over time based on its internal performance metrics. She said she wasn’t aware of any Medicare Advantage provider cuts in Connecticut for the coming year.
Though she acknowledged the rate pressure facing Aetna and other insurers, Cocozza said Aetna’s Medicare business can continue to be profitable, as evidenced by the insurer’s recently announced Medicare expansion into Louisiana, West Virginia and other states.
“We really believe Medicare can continue to be a viable business for us,” she said.
Stars matter
So what’s driving the uncertainty?
Obamacare is making cuts to the Medicare Advantage program to help pay for other parts of health care reform.
Facing reduced reimbursement payments, insurers are trimming provider networks to keep their Medicare Advantage businesses profitable. It’s also critical for insurance companies to improve their performance ratings, which are used by the U.S. Centers for Medicare and Medicaid Services (CMS) to pay insurers bonuses.
CMS uses health outcomes, member satisfaction surveys and other metrics to give insurers star ratings for their Medicare Advantage plans. A plan earns a rating between one and five stars. A five-star rating is considered excellent and is relatively rare. Cigna is the only publicly traded insurer to have a five-star plan.
Starting in 2015, any insurer with a rating below four stars will no longer be eligible for bonus payments.
For some companies like United Healthcare, that’s a big problem. In 2012, United raked in $547 million in Medicare Advantage bonus payments, but most of its plans had ratings below four stars, according to an analysis by the Kaiser Family Foundation.
Under Obamacare’s new 2015 rules, United Healthcare would have received just $6.2 million in bonus payments last year, Kaiser found. United Healthcare executives say they’re focused on improving their star ratings. But just a quarter of its patients are enrolled in plans ranked four stars or higher.
For Aetna’s part, Cocozza said the company has invested heavily in improving its star ratings. As of October, more than 60 percent of Aetna’s Medicare members were in plans with four stars or more. That performance is directly linked to the amount of money Aetna can reinvest into benefits for its members.
“Those components have a great bearing on our competitive proposition,” she said.
Docs remain worried
While insurers ponder their next move, doctors are hoping things don’t get worse.
United has been tightlipped so far, but some doctors speculate the insurer is trying to slash costs by targeting providers with sicker patient populations, while also increasing its negotiating power with remaining providers.
Dr. Bollepalli “Bo” Subbarao, president of the Hartford County Medical Association, which is suing United Healthcare, said the insurer is casting aspersions on doctors by dropping them without explanation. “Scaring patients with words about quality concerns is hypocritical; meanwhile [United] is keeping the same doctors in other commercial plans,” Subbarao said. “HCMA believes that this behavior is a reflection of greed and is a pure betrayal of the patients and their doctors.”
Correction: The original version of this story gave an incorrect first name for Nancy Cocozza, president of Aetna’s Medicare business.
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