Health insurance companies received a gift from the federal government last week. The 2018 Medicare Advantage rate policies included a better-than-expected pay bump and industry-friendly policies.
Payment rates for insurers that sell Advantage plans will rise by 0.45% on average for 2018, the CMS announced. That's a slight bump from the 0.25% rate increase proposed in February. The average payment rate will increase by 2.95% after taking into account the way health plans code their members' diagnoses, the CMS said.
The agency “basically gave the plans everything they asked for,” said John Gorman, a former CMS official who is now a consultant in Washington.
The rate policies for 2018 were a bit of good news for the insurance industry in the midst of chaos surrounding repeal of the Affordable Care Act, according to James Sung, an insurance analyst with ratings firm S&P Global. “Insurers like predictability, and Medicare Advantage is probably the most stable (market) right now,” he said.
Medicare Advantage, the private managed-care version of the federal health program for seniors, covers nearly 18.7 million people. The market could grow if Republican lawmakers succeed in turning Medicare into a premium-support system that would push beneficiaries toward private plans. But if the CMS had approved low rates or unfavorable policies, private insurers may have turned away from Medicare Advantage or offered skinnier products with higher cost-sharing.
In its new rates, the CMS didn't bend to every insurer request. Health plan and consumer advocate groups criticized the agency for failing to address an unintended glitch in the healthcare law known as the benchmark cap, which shortchanges some Advantage plans on the incentive payments they earned for providing high-quality healthcare.
Ceci Connolly, president and CEO of the Alliance of Community Health Plans, said in a statement that she was disappointed as those payments affect 2.5 million seniors. Since 2012, Advantage plans have received bonuses for providing high-quality healthcare. But the benchmark cap limits Advantage payments to pre-ACA levels. The glitch has eaten away at health plans' revenue. And the CMS has said it doesn't have the administrative authority to fix the benchmark cap.