But insurers say the cuts have forced them to reduce benefits, increase patient cost-sharing and narrow provider networks. That network narrowing has caused an outcry among seniors, physicians and hospitals, and prompted at least one lawsuit.
Meanwhile, insurers and industry analysts say Advantage has become an increasingly important business for insurers, and major companies are going through a wave of acquisitions and consolidations to expand their footprint in the Advantage business.
There's “huge growth” ahead for Advantage plans as the baby boomers turn 65, Bank of America analyst Kevin Fischbeck said.
Nevertheless, insurers are issuing ominous warnings. Humana, the second-largest Advantage insurer, said in a recent Securities and Exchange Commission filing that it anticipates Advantage payments will be reduced by an additional 6% to 7% for 2015, higher than the 4% to 5% it previously estimated. Similarly, executives at UnitedHealth Group, the largest Advantage insurer, raised concerns with investors this month about how rate reductions could limit profitability.
America's Health Insurance Plans' marketing campaign, “Seniors Are Watching,” is expected to include TV and print advertising, as well as lobbying. AHIP spokesman Robert Zirkelbach indicated that the organization plans to spend “seven figures” on the effort.
But with the continued enrollment growth, some analysts predict it will be tough arguing against further cuts. “Dire predictions” about the impact of previous cuts turned out to be overstated, Citi Research analyst Carl McDonald wrote in a note to investors this month.
Indeed, insurers reported that Advantage enrollment in 2013 was higher than anticipated. Health Net, of Woodland Hills, Calif., for instance, experienced a 5% membership increase after projecting a 5% decline. UnitedHealth Group's Advantage business grew by 17%.
Morgan Stanley analyst Andrew Schenker projected that Humana would enjoy a 9% enrollment increase and Aetna would see a 5% hike this year.
With the passage of the ACA, some in the insurance industry predicted the future for Medicare Advantage would be bleak. Advantage plans faced more than $200 billion in reduced spending on the program through 2019. That led the CMS to project that enrollment by 2017 would total only 7.4 million—half of what it would have been without the cuts.
But four years later, the Advantage program has continued to experience a growth boom that started a decade ago. Between 2010 and 2013, the number of enrollees grew from 11.1 million to 14.4 million, with average annual growth of more than 9%.
In 2011, Advantage plans received an average of $9,893 per beneficiary, 2.7% more than anticipated, according to the Government Accountability Office. Profits totaled $3.3 billion, or 4.5% of premium revenue.
“What we've really seen is the program has actually thrived since the law passed,” said John Gorman, a Washington-based consultant who works with insurance companies.
The continued growth is at least partly because baby boomers are more comfortable with managed-care plans than previous generations, experts say.