“Just from a dollars and cents perspective, that's where the dollars are,” said Ryan Langston, vice president of healthcare research at the investment bank TD Cowen. “A SNP patient carries materially more premium revenues.”
As it becomes harder for Medicare Advantage carriers to reap the fat profit margins to which investors had grown accustomed, products such as D-SNPs, Chronic Condition SNPs and Institutional SNPs are a big opportunity, said Tyler Overstreet Cromer, who leads the complex care programs, policy and research practice at ATI Advisory.
The SNP market has experienced enormous expansion over the past decade: SNPs cover 6.6 million people this year, up 255% from 10 years ago, 125% from five years ago and 16% from 2023, according to a KFF analysis of Centers for Medicare and Medicaid Services data. D-SNPs represent about 85% of SNP membership.
“A lot of the enrollment growth in Medicare Advantage, if you look over the last couple of years, is really being driven by those SNP products,” Cromer said.
CMS projects SNP membership will jump more than 8% to 7.2 million of the 35.7 million people expected to enroll in Medicare Advantage for next year. The number of SNPs is expected to grow 9% and account for one-quarter of plans sold for the 2025 plan year, according to CMS. Open enrollment begins Tuesday and ends Dec. 7.
“It's not like more plans are splitting the same slice of the pie. The slice of the pie is getting bigger,” Cromer said.
Next year, UnitedHealth Group subsidiary UnitedHealthcare is adding the most net new D-SNP plans, followed by Humana, Elevance Health and CVS Health subsidiary Aetna, according to an analysis by the investment bank Stephens.
The appeal of SNPs from the insurer perspective is twofold, Langston said.
For one, these members generally have greater financial barriers and multiple comorbidities compared to other Medicare Advantage enrollees, which means insurers have an opportunity to control their costs and improve their health, Langston said. For another, the government pays more to cover higher-acuity beneficiaries through the risk-adjustment program, he said.
“You have an enrollee, and let's say they qualify for a Special Needs Plan. More than likely, you're going to be able to add diagnosis codes or have more diagnoses on that particular patient, and that feeds into the risk score, which then gets multiplied by the base rate and therefore you, on average, get more premium dollars for that particular patient,” Langston said.
Federal and state regulators have also focused on improving health coverage for dual-eligible beneficiaries. In April, CMS issued a final rule requiring insurers to better blend Medicare and Medicaid benefits, for instance.
“States and CMS are both really pushing Medicare-Medicaid integration. So with that push, it makes sense that we would see focus on D-SNP also grow at the same time,” Rizer said.
Humana, Centene and Molina Healthcare are growing their D-SNP footprints while contracting elsewhere. For example, Medicare Advantage heavyweight Humana will sell D-SNPs in 6% more counties while scrapping 1,023 products, or about 2% of plans in the rest of its Medicare Advantage portfolio, according to Stephens.
In addition, UnitedHealthcare and Elevance Health are selling D-SNPs in more new counties than they are individual plans. Leading insurer UnitedHealthcare, for instance, is adding D-SNPs in 62 counties and traditional plans in 33 counties, according to Stephens. The same report identifies Alignment Healthcare as an outlier among publicly traded insurers because it reduced its presence across the board.
Yet one common strategy for constraining costs next year may run counter to insurers' ambitions for SNPs. Many Medicare Advantage carriers have scaled back benefits for over-the-counter health products, and that coverage has been alluring to potential SNP members in the past, according to a TD Cowen review.
“OTC benefits, to our understanding, drive enrollment, especially on the SNP side,” Langston said. “If you can have $100, $200, whatever the number is, loaded onto a card to use for healthy foods and things like that, that can make a lot of difference in someone's life.”
Aetna, Humana, Elevance Health and Centene reduced their average monthly allowances for D-SNPs by about 20% while UnitedHealthcare increased its benefit by 1% next year. “It looks like United, at least on the SNP side, will outgrow the market in 2025,” Langston said.
Insurers are creating Medicare products in addition to SNPs that target specific populations. For example, Humana, Scan Health Plan and Alignment Healthcare introduced Medicare Advantage plans for veterans, women, Asian Americans and LGBTQ+ people.
