The amount in fines pales compared with the billions of dollars Medicare pays private Advantage health plans every year to cover beneficiaries. But the heightened auditing and scrutiny has observers convinced the CMS wants to have more insurers in compliance with consumer protections.
“They'll pick and choose their business partners now through enforcement,” said John Gorman, founder of Washington-based consultancy Gorman Health Group.
Citizens Choice Health Plan, an insurer based in Orange, Calif., received the largest fine thus far. The CMS said in February that Citizens Choice had to pay $689,600 because its Medicare members were inappropriately denied prescription drugs and were not immediately notified of coverage decisions, and the plan did not offer members the appropriate avenues to file appeals or grievances. Nearly all Medicare Advantage fines and sanctions involve noncompliant drug formularies or disputes over coverage determinations.
The other penalties in the first three months of the year ranged from $32,700 at AlohaCare, a not-for-profit Advantage plan based in Honolulu, to $349,800 at New West Health Services, a provider-sponsored plan in Helena, Mont.
Civil money penalties are the most common and lowest-level enforcement actions the CMS takes. Intermediate sanctions, such as immediately suspending a health plan from marketing or enrolling members, are considered to be more damaging to the insurer's business.
SummaCare, an insurer that is part of Summa Health System in Akron, Ohio, was one of three organizations released from sanctions in the first quarter this year. The sanctions went into effect in August and were lifted in March, meaning SummaCare was not able to enroll any new members during Medicare's annual enrollment period in the fall.
The insurer took a financial hit from the punishment, which mostly was tied to violations of pharmacy benefits and the appeals process for members. Claude Vincenti, SummaCare's president, said his plan had a little more than 33,000 Advantage members before the sanctions were imposed. The plan now has around 27,500—a membership decline of almost 17%.
A health plan's star rating is also automatically reduced to 2½ stars when the CMS issues marketing or enrollment sanctions. So in addition to not being able to enroll or sell the plan to new Medicare beneficiaries, the plan temporarily operates with a lower quality score.
Advantage plans with fewer than four stars do not receive any bonus payments from Medicare. SummaCare had a 4½-star rating before the sanctions were handed down, and it will retain that rating for its 2016 plan enrollment now that the sanctions are gone. But the penalty could be a “kiss of death” for health plans in competitive markets that aren't able to correct their problems quickly, Gorman said.
SummaCare now hopes it can retain and win back loyalty from seniors in the area after it files 2016 rates this summer. “Being a local plan, we've always enjoyed a very strong reputation in our local market, and we're anxious to get back on track to earn back that reputation,” Vincenti said.
The CMS has not slowed its enforcement momentum heading into the second quarter. Aetna was fined $1 million at the beginning of this month for having inaccurate information on which pharmacies were in-network. Last week, Health First Health Plans, a provider-owned insurer based in Rockledge, Fla., was handed a $420,600 penalty.
Thanks to an aggressive lobbying campaign and higher-than-expected costs in fee-for-service Medicare, the average Medicare Advantage payment rate will increase by 1.25% in 2016. The rate goes up to 3.25% when factoring in the expected growth of risk-score coding.