Largest Medicare Advantage plans bulk up even more

Health insurers are spending more time and money on their Medicare Advantage products, yet the dominant players maintain an iron grip on the market.

The top four largest Medicare Advantage companies—UnitedHealth Group, Humana, Kaiser Foundation Health Plan and Aetna—have almost 9.72 million members, covering 53% of the 18.2 million people who have an Advantage plan, according to a Modern Healthcare analysis of CMS data. UnitedHealth leads the way with more than 3.8 million members and Humana follows close behind with almost 3.2 million members.

Baby boomers are aging into Medicare at a rapid clip and many are choosing Medicare Advantage, the managed-care version of the program. Even though the Affordable Care Act has cut payments and changed policies, the program's growth has exploded, giving insurers access to huge sums of taxpayer-funded revenue.

UnitedHealth added the most members by far between March 2015 and the same month this year. The Minnetonka, Minn.-based conglomerate added nearly 370,000 seniors to its plans.

Aetna added 107,000 members during the same time span, and Kaiser enrolled 70,000, the next highest gains. Humana recorded very little growth year over year because a major client, the Ohio Public Employees Retirement System, moved its retirees and spouses from Humana's group plan to a private exchange.

UnitedHealth invested heavily in improving the quality of its Medicare plans and also shifted members into plans with better care coordination and clinical protocols. The insurer said it expects to have 80% of its Advantage members in plans with at least four stars by 2018. The CMS judges Advantage plans on a scale from 1 to 5, and plans with at least four stars have better retention rates and lead to highly coveted bonus payments.

“Star scores really matter for your enrollment,” Wells Fargo Securities analyst Peter Costa said. “That drives the extra money, and the better-quality plans show extra enrollment.”

UnitedHealth will lose its top spot if federal and state regulators sign off on the pending merger of Aetna and Humana. Costa said the combined Aetna company would be a highly rated, powerful Advantage marketer in the individual and group segments.

Aside from Aetna, Kaiser and UnitedHealth, nine other companies grew their Advantage membership by at least 20,000 people over the past year, including Cigna Corp. and several Blue Cross and Blue Shield plans. Thirty-one Medicare insurers now have at least 100,000 members.

“Most have navigated the sector pretty well considering some of the ACA mandates that are in place,” said Vishnu Lekraj, a healthcare equities analyst at Morningstar.