Led by industry giants such as Cigna HealthCare and Humana, a second wave of retreats from Medicare-risk markets may be taking shape, as managed-care plans continue to re-evaluate the impact of the Balanced Budget Act of 1997.
This round of pullbacks and slowdowns appears to be focusing on core urban markets to a greater degree than last year. At that time, many plans said they were exiting rural markets where they couldn't make a profit because of low reimbursement rates and low concentrations of enrollees and participating providers.
Last year, nearly 100 Medicare-risk plans left selected markets around the country. Those departures forced 450,000 Medicare beneficiaries to change health coverage, including about 45,000 people who had no option but to return to traditional Medicare plans.
Cigna confirmed early this month that it will exit six of its 24 Medicare HMO markets as of Dec. 31, even though the plans are not experiencing significant operating losses, officials said.
The markets are Cleveland; the Kansas City area; Little Rock, Ark.; south New Jersey; Philadelphia; and San Diego (May 10, p. 4). Those departures will affect 9,800 enrollees, or 5% of Cigna's roughly 188,000 senior enrollees. Bloomfield, Conn.-based Cigna said the decision was based on reimbursement rates, uncertainty in the regulatory and legislative arenas, rising medical costs and its competitive position in those markets.
In February, Cigna froze Medicare-risk enrollment in Connecticut and in two Florida markets-Orlando and Tampa-because it said large numbers of enrollees were trying to enroll in its plans after competitors dropped out of those markets.
Potential new enrollees will have to wait until November's open enrollment period to get another crack at Cigna's Healthcare for Seniors.
Humana, which has more than 500,000 Medicare-risk enrollees, has not announced plans to exit any Medicare markets this year. But the Louisville, Ky.-based managed-care company said in April it would immediately slow marketing efforts for its Medicare-risk products in about 35 markets (May 3, p. 7).
Humana officials acknowledge it is "highly likely" they will add premiums and/or cut benefits in most of the 89 counties where Humana offers Medicare-risk coverage. Humana also will "consider the prospect of exiting (some) counties," said spokesman Greg Donaldson.
He disputed a May 7 report in the Louisville Courier-Journal that quoted Chief Executive Officer Greg Wolf as saying Humana had definite plans to exit several markets. Humana says Wolf was misquoted.
Meanwhile, Woodland Hills, Calif.-based Health Net may be forced to exit a county in central California where providers have rebelled against Medicare-risk reimbursement rates and refused to accept them, Cora Tellez, Health Net's president and CEO, said last week.
"If they're saying 'we're not going to play,' what are we going to do?" asked Tellez.
Providers in the area identified that county as Fresno, population 680,000.
Tellez said that reimbursement-related issues "will define the nature and extent of our participation in Medicare."
Health Net has about 155,000 Medicare-risk enrollees in California.
A number of other managed-care companies are considering similar steps, according to industry sources. These include Aetna U.S. Healthcare, AvMed Health Plan, a number of Blues plans, Health Net parent Foundation Health Systems, Harvard Pilgrim Health Care and United HealthGroup.
On the regional level, Harvard Pilgrim, which earlier this month announced a $94 million operating loss for 1998, is "reassessing" its participation in Medicare-risk markets in Massachusetts, southern New Hampshire and Rhode Island, said Alan Raymond, a spokesman for the Brookline, Mass.-based managed-care organization.
He said Harvard Pilgrim has sustained "significant losses" in some of those Medicare-risk markets.
Health plans offering Medicare+Choice options have until July 1 to tell HCFA where they plan to offer Medicare-risk coverage next year.
Karen Ignagni, who is the president and CEO at the American Association of Health Plans, maintains that a growing gap between reimbursement for Medicare+Choice plans and the traditional fee-for-service Medicare program will fuel further pullouts this year and next.
"Health plans are still deciding what they will be able to do," Ignagni said. "But as the months pass and Congress doesn't do anything to close this gap, (more plans will drop out)."
Markets that will be most affected by the gap over the next five years include Baltimore, Boston, Chicago, Dallas, Detroit, Houston, Los Angeles, Miami, New Orleans, New York, Philadelphia and Pittsburgh, according to an AAHP study released March 31.
Meanwhile, companies such as Blue Cross and Blue Shield of Florida, Humana and Medicare-risk industry leader PacifiCare Health Systems are considering slashing benefits and raising or adding premiums and copayments next year to bolster their profit margins.
"It's still a little premature to say definitively what our plans will be, but you can pretty much count on us making those kinds of changes next year," said David Erickson, director of investor relations at PacifiCare, which had 991,600 enrollees in its Secure Horizons Medicare HMO as of March 31.
PacifiCare has no plans to exit Medicare risk markets this year, Erickson said. But in a statement released in mid-March, PacifiCare Chairman and CEO Alan Hoops predicted there would be a further exodus from the Medicare-risk market unless Congress deals with reimbursement issues.
"If the current disparity between rising medical cost trends and HMO reimbursement levels is not adequately addressed," Hoops said, "Medicare beneficiaries will ultimately be left with fewer healthcare choices in the marketplace."