Centene will not be allowed to expand its Medicare Advantage footprint in certain locales next year after its plans consistently received poor scores in the federal quality ratings program.
The insurer will be unable to expand nine of its 108 contracts in 2024, according to an analysis by HealthMine, a consultancy for health insurance companies. About 84,000, or 5%, of Centene’s 1.5 million Medicare Advantage members with Part D prescription drug coverage are enrolled in the nine plans, which cover counties in Ohio, North Carolina, Arizona, Connecticut and Nevada.
The freeze could affect Centene’s future in Medicare Advantage, since geographic expansion has been insurers’ primary way of capturing market share in the lucrative, fast-growing program. The company declined to quantify how its stars performance will affect its operations in 2024.
“The 2023 plan year star ratings evaluate Centene’s work done in prior years,” a Centene spokesperson wrote in an email. “As we have stated publicly this year, Centene’s new management team identified rating issues and has aggressively implemented operational changes which we expect will deliver improved stars ratings in future years.”
The freeze on the company’s geographic growth stems from a technical update the Centers for Medicare and Medicaid Services introduced in its final rule in May. Any contract operated by a Medicare Advantage plan that receives 2.5 stars or fewer for two consecutive years will be denied service area expansion for the coming year. A single “poor performing” contract will freeze geographic growth for every contract operated under the associated legal entity.
Medicare Advantage insurers generally hold one legal entity for each state in which they operate. But because insurers often shift members from lower-rated contracts to higher-rated ones as a way of maximizing the bonuses associated with the stars program, a single legal entity can include products offered in multiple states.
Centene is not the only company barred in 2024 from expanding its Medicare Advantage footprint. Growth by small insurers Imperial Health Plan of California and Zing Health also will be restricted, according to the analysis. A total of 14,100 patients are enrolled in the two plans. Neither Zing Health nor Imperial Health Plan of California responded to interview requests.
Among large insurers, Centene fared the worst in the ratings program this year. Just 3% of its members are enrolled in plans that meet the four-star quality bonus threshold for 2023, down from 54% last year, according to analysts at Cowen. Health insurance companies rely on the quality bonuses to add supplemental benefits and zero-premium plans, which help differentiate their offerings in the crowded Medicare Advantage market.
“Centene just had a perfect storm of industry and operational characteristics that’s gotten them caught very flat-footed, in a very high-risk fashion,” said Melissa Smith, executive vice president of consulting and professional services at HealthMine.
In 2018, Centene purchased not-for-profit government insurer Fidelis Care for $3.75 billion. Two years later, Centene completed its $17.3 billion acquisition of rival Medicare Advantage carrier Wellcare. And in January, it paid $2.2 billion for Magellan Health, an insurer, behavioral health provider and pharmacy benefit manager. Centene shed Magellan Health's pharmacy services after facing accusations from multiple states that the company's former pharmacy benefit manager overcharged Medicaid programs for prescription drugs.
“They had immense volumes of mergers and acquisitions, and immense amounts of integration work. Their organic characteristics and the climate was ripe for them to have a dip, which was compounded by the terrible false sense of security that all of the 2021 star ratings and 2022 star ratings' COVID relief infused for them.”
CMS tallies approximately 50 clinical outcome and patient experience measures to determine an insurer’s overall star score. The agency relaxed how star ratings were calculated during the past two years as part of its COVID-19 pandemic relief program, leading to a record number of insurers to receive high scores in the five-point program. This year’s resumption to pre-pandemic standards, as well as changes to the weight in the formula for the customer experience, led to an industrywide drop in star ratings. The changes to the methodology were expected to drain $800 million from the Medicare Advantage program in 2023, according to a September analysis by McKinsey & Co., a consultancy.
Centene and other insurers' 2023 star scores could also affect their 2025 expansion plans.
Insurers that received ratings of 2.5 or lower this year have three months to improve their scores, Smith said. Otherwise, they could be barred from expanding in 2025. UnitedHealthcare, Humana, Cigna, CVS Health’s Aetna and Molina Healthcare each received at least one contract rated 2.5 stars or lower this year.
Molina Healthcare and UnitedHealthcare declined to comment. Aetna did not respond to an interview request.
Just one of Humana's 47 contracts received 2.5 stars or fewer this year, a spokesperson wrote in an email. He said 96% of Humana's Medicare Advantage members are enrolled in plans rated four stars and above.
Cigna’s low-rated plans are located in newer areas for the insurer where their small membership makes them ineligible for certain stars measures, a spokesperson wrote in an email. Three of the company’s 16 contracts, representing 9% of its 543,000 Medicare Advantage members, are at-risk of being frozen in 2025.
“Given the newness of the rating for the two new geographies, we do not anticipate any impacts to our expansion,” the spokesperson said.
Among large insurers, Centene faces the most risk for 2025. Sixty two of the company’s contracts will be frozen if the company does not improve its scores, according to the HealthMine analysis. Some 1.1 million, or 74% of the company’s membership, are enrolled in the plans.
This year, Centene’s Wellcare Medicare Advantage business announced it will expand into 209 new counties.
Last year, the insurer expanded its reach into 327 new counties in three additional states. The company also moved to consolidate its disparate brands under the Wellcare brand, and named Hall of Fame quarterback Joe Montana as its spokesperson.
All the moves helped Centene grow its membership at the fastest rate among large Medicare Advantage insurers in 2022, at nearly 13%, compared with an industry average of 3.5%. Centene holds nearly 4% of the total Medicare Advantage market.
CMS may not necessarily move to curtail the insurer's growth after its performance in this year's stars program.
The agency could make a regulatory allowance for a company and fail to enforce its requirements to the fullest extent, said Jack Hoadley, research professor emeritus in the health policy institute of Georgetown University’s McCourt School of Public Policy.
“Sometimes they look at situations and find reasons not to penalize individual organizations to the full extent that they can,” Hoadley said. “But plans that earned 2.5 or 2 stars are well below the norm. That should not be taken lightly.”
CMS did not respond to interview requests.
