Blue Cross Blue Shield of Michigan has formed a new holding company to partner with Blues plans in other states to form joint ventures to sell new products under Medicare Advantage.
The federally funded health insurance program for seniors is the nation’s fastest-growing health insurance sector, fueled by the aging baby boomer population.
Executives at Blue Cross confirmed the strategy and said the Detroit-based health insurer’s board has approved creation of the new company, called Medicare Holdings.
Talks are underway with several Blues plans that don’t currently offer Medicare Advantage HMO-type plans to their members, said Pritpal Virdee, newly appointed president of Medicare Holdings.
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“Our Medicare plans are very successful in the marketplace. We have a lot of experience in this business, and this is a perfect opportunity and a natural progression for us to do this,” said Virdee, who has been with Blue Cross Michigan since 2017 and previously was senior vice president and COO of the company’s senior health services department.
Medicare Advantage coverage is a form of Medicare coverage managed through private insurers. More than a third of Medicare-eligible seniors are insured through Medicare Advantage plans.
The Michigan Blues operate a number of Medicare Advantage HMOs, PPOs, Medicare Part D drug plans, Medicare Advantage with Prescription Drug plans and Medicare supplemental plans (Medigap).
With 530,000 members, the mutual health insurer has the seventh-largest Medicare Advantage business in the nation. Blue Cross Michigan also is the second-largest Blues Medicare plan after Anthem and Michigan’s largest, the company said.
“Our joint ventures will initially be in Medicare Advantage and maybe later Part D and MAPDs,” Virdee said.
There are two primary reasons why the Michigan Blues are embarking on the joint venture plan, Virdee said. First, creating new plans supplements its consulting business, Advantasure, which was formed in 2016 to provide back office, compliance and call center services for Medicare Advantage plans.
“We see growth in (the Medicare) market sector with the number of people aging into Medicare is increasing. Ten thousand people turn 65 every day,” he said. “There is a lot of growth potential. The success of Medicare Advantage programs is very high.”
Internal Blue Cross documents obtained by Crain’s also show that Medicare Holding is expected to “grow revenue that adds to the financial contributions already being made to Blue Cross by the Emerging Markets Division.”
Blue Cross’ Emerging Markets division, a high-revenue-producing group also includes Advantasure, Senior Health Services and the Accident Fund Group, is headed up by Elizabeth Haar, former CEO of the Accident Fund.
The document goes on to say “Emerging Markets continues to grow, evolve and diversify its business, designed to help us deliver positive financial returns, strengthen our company and keep health care costs more affordable for our customers.”
Susan Moore, R.N., a health care quality consultant with Ortonville-based Health Care Resources, said health insurers around the country are investing in Medicare Advantage plans because it is highly profitable and growing quickly.
“Everybody is out for the Medicare Advantage market and going against Humana. It is where the money is,” said Moore, who travels around the country advising plans on quality improvement. “I am not surprised Blue Cross is increasing its presence. It has deep pockets, and they most likely (with target) those markets where they have consulting services.”
Over the past decade, Medicare Advantage membership has doubled to about 21 million enrollees, or about 38 percent of all Medicare beneficiaries. Nationally, there are 44 million people, accounting for 15 percent of the U.S. population, enrolled in the Medicare program. With aging baby boomers, enrollment is expected to rise to 79 million by 2030.
United is the market leader with 25 percent of the Medicare Advantage market, followed by Humana at 17 percent and the Blues plans collectively at 13 percent, said the Kaiser Family Foundation.
Projections call for Medicare Advantage enrollment to account for 42 percent of beneficiaries by 2030, or about 33 million, said the Congressional Budget Office.
“That is the opportunity” to sign up members, maybe those Blue Cross members who “have been (Blue Cross) commercial members and reach Medicare age” and opt to “stay with Blue Cross in a Medicare plan,” Virdee said
Of the 530,000 members in Michigan Blues’ Medicare Advantage plans, 90,000 are in HMO plans in Blue Care Network and 430,000 are in PPO plans in Blue Cross, he said. Blue Cross also has 85,000 outside of Michigan that are part of the PPO numbers.
Virdee said he could not predict growth in the Medicare market, although data shows nationally enrollment is growing at more than an 8 percent annual pace. Competition for members is one of the biggest challenges in growing market share. “You need to price your product correctly and provide quality services” for growth, he said.
Under the growth plan strategy for Medicare Holdings, which is expected to be renamed later this year, Blue Cross will create joint venture companies for Medicare Advantage plans with other Blues plans. The ownership stakes may vary depending on the arrangement, but he said the new plans will be “owned jointly.”
“We will provide service for them to operate through Advantasure,” said Virdee, who said Advantasure has contracts with 17 Medicare Advantage plans. He declined to name them.
Virdee said Blue Cross hopes to announce partnerships this fall. He said the clock is running on creating plans, receiving approvals from the Centers for Medicare and Medicaid Services to begin signing up members by Oct. 1, 2020, for coverage to begin Jan. 1, 2021. “We have 15 months from now to go live,” he said
A critical aspect of making a Medicare Advantage plan financially successful is scoring well on Medicare’s star rating system. Health plans are surveyed every year on more than 40 measures in five categories and hands out star ratings for each plan on a 1-5 scale.
Star ratings are tied to bonuses and benchmark rates, and they can make a difference to consumers when choosing a plan. In 2012, Medicare began to make 5 percent quality bonus payments to plans that achieve a 4-star rating or higher.
In 2017, the Michigan Blues received a dose of bad news when Medicare dropped the ratings for its eight HMO plans to 3.5 stars from 4, costing the Blues hundreds of thousands and possibly millions of dollars in lost bonus payments, said a inside source at Blue Cross who requested anonymity.
Virdee declined to say how much Blue Cross left on the table by not garnering the bonus payments for the HMO plans.
“We have corrected all that and are in the midst of it,” said Virdee, noting that its Medicare PPO plans have received 4 stars for the sixth year in a row. “The bar is always raised, and Medicare expects plans to keep performing at a higher and higher standard.”
Of the 40 measures, there are five categories Medicare uses in its star rating system to judge Medicare Advantage plans. They are staying healthy (screenings, tests and vaccines); managing chronic (long-term) conditions; plan responsiveness and care; member complaints; and customer service.
Virdee declined to identify which one or more measurements Blue Cross slumped on with the HMO plans. “It only takes one of them to go off-kilter. You keep performing and sometimes you can’t catch the changes” until it is too late, he said.
Moore said most health insurers track the Medicare star ratings at a very high level because millions of dollars of bonus payments are at stake.
“I am sure the stars go up to the boardroom because there is a big emphasis to stars. Management is held to account when they don’t hit at least 4s,” Moore said. “It is where the money is.”
Other health insurers in Michigan are also competing heavily in Medicare Advantage, including Priority Health, which has the most plans with 4-star or higher ratings, and Health Alliance Plan of Michigan. Humana and United, the nation’s largest players, also compete for Medicare Advantage customers in Michigan.
In 2019, all of Priority Health’s Medicare plans scored a 4-star or above rating. Priority’s HMO-POS Medicare Advantage plans are the only ones in Michigan to earn 4.5 stars, officials said.
Like Blue Care, HAP had 4-star Medicare Advantage plans for several years, but in 2017 its HMO product dropped to 3.5 stars. Many of its other Medicare Advantage plans maintain 4 stars, officials said.
Jon Cotton, president of ApexHealth, a start-up Medicare Advantage managed-care company based in Grosse Pointe Farms, said the Medicare star rating system is good for consumers because it forces health plans to improve. Apex has received its Medicare license and will be signing up members this fall for 2020 in North Carolina, South Carolina, Virginia and Tennessee.
“Health plans will live and die by the stars. You have to those stars or it is guaranteed you will lose money,” said Cotton, former president of Meridian Health.
Moore said the rating system is so successful in driving quality improvements that the National Committee on Quality Assurance, which accredits health plans and conducts quality surveys, is moving to a straightforward up or down accreditation system with star ratings.
“Everyone is mimicking the star system. This is the way it is going. The stakes are going to be higher for everybody,” Moore said.
Date: July 02, 2019
Source: Crain’s Detroit Business