An estimated 1.6 million low-income Medicare beneficiaries nationwide will have to switch prescription drug plans in January because their insurers, most notably UnitedHealth Group and Humana, bid too high to retain the business.
The change has some advocates and providers concerned that these seniors could see their coverage erode or their drugs left uncovered by the switch, and opened up fresh discussion of whether Medicare Part D is too vulnerable to shifting commercial winds. It also has analysts pondering how the two biggest insurers in the Medicare field could have missed their mark.
About 650,000 low-income beneficiaries now covered by UnitedHealth will have to switch plans, the Minnetonka, Minn.-based insurer announced on Sept. 27. Thats because UnitedHealths 2008 bids exceeded the CMS low-income premium benchmarks in 18 out of 34 U.S. regions. Humana has not released information on how many of its bids didnt qualify, but analysts put that loss at 300,000 members.
UnitedHealth would not say which markets they failed to offer a low enough bid in, and Humana didnt return phone calls by deadline. But the CMS and analysts said some of the biggest markets will be affected, including California, Florida, New York, Ohio and Texas. Cigna Corp. and Sierra Health Services also did not qualify to continue coverage for these low-income enrollees in some markets, the CMS said.
UnitedHealth Group has the biggest presence in Medicares prescription drug plan, Part D. It has about 4.7 million members in stand-alone drug plans in a co-branding relationship with the AARP, representing more than 27% of enrollees. Humana is the second-largest insurer in the program, with 3.5 million members. Together, the two insurers cover close to half of the Medicare Part D enrollees in stand-alone drug plans.
The CMS would not say how many of these dually eligible beneficiaries would have to switch plans in January, but Washington consulting firm Avalere Health put the figure at 1.6 million.
In January, the CMS will automatically switch these low-income enrollees into other plans. These so-called auto-enrollees are very low income and as such are eligible for both Medicaid and Medicare. They receive their prescription drug coverage through Part D, but pay zero premiums. If any of them wish to stay with their current plan, they will have to pay a premium.
Advocates for seniors expressed concern that some members could see a delay in coverage, or have to switch or drop medications because they will no longer be covered under new plans. It could mean significant changes for these folks, said David Lipschutz, staff attorney with the California Health Advocates, a nonpartisan group that counsels Medicare beneficiaries on various plan options.
WellPoint could pick up some of these beneficiaries. Two of the insurers Unicare plans qualified to provide coverage for the first time in some markets where the other insurers fell short, according to the CMS.
These dually eligible auto-enrollees in Part D are among the most fragile seniors, with few resources and who most often turn to their physicians or other providers to explain the programs changes, said Elizabeth McNeil, vice president of federal government relations for the California Medical Association. Its here we go again, McNeil said. Wed like to see some long-term stability in the Part D program.
McNeil said physicians have no clue about this change. Were going to have to spend a lot of time educating our members about this, she said.
The insurers may have failed to make suitable bids because the CMS changed its methodology, John Rex, an analyst at Bear Stearns & Co., said in an investment note. Rex and other analysts said the news was not good for UnitedHealth, especially coming on the heels of the departure of two key executives this fall. The revenue lost will be around $1.7 billion for the insurer, they estimated.
Frankly we are shocked, said Greg Nersessian, research analyst at Credit Suisse. In fact, we would have been very surprised had UnitedHealth missed the benchmark in one region, much less 18 out of the 34.
UnitedHealth officials remained optimistic, however.
We expect the loss of auto-enrolled dual eligible members in select regions will have a minimal impact on our overall earnings performance, said Anthony Welters, president of UnitedHealth Groups public and senior markets group, in a written statement.