The booming Medicare Advantage market has become a strategic focus for major insurers and retailers to band together and grow their businesses.
Insurers partnerships are reflective on the growing population of enrollees. Over the past few years, the number of Medicare Advantage enrollees has exploded, thanks to an increasingly diverse, cost-conscious and aging population that prefers the extra benefits not offered in traditional Medicare.
The latest federal data show that 26.8 million people were covered by Advantage plans as of July, up more than 41% from 2017. During that same time, the number of those eligible for Advantage plans rose 10.3%. Approximately 10,000 Americans turn 65 every day. Anthem has said 200,000 of its existing beneficiaries reach Medicare-eligibility annually.
That's led to big partnerships between insurers and retailers. Anthem and The Kroger Co. in July announced they planned to launch a joint Medicare Advantage plan in Atlanta, Louisville, Cincinnati and southern Virginia come 2022. Walmart teamed up with Nashville, Tennessee-based Clover Health in November to offer a joint Medicare Advantage plan in Georgia, although that partnership has ended. Walmart also offers a joint, co-branded Medicare Part D plan with Louisville, Kentucky-based Humana, which it launched in 2010.
Humana counts the second-most of Medicare Advantage enrollees in the nation; UnitedHealth Group is the largest Medicare Advantage insurer.
By partnering with retailers like Kroger, insurers can offer their members access to another, lower-cost site of care, and allow them to differentiate themselves in the crowded Medicare Advantage market, which is growing at a faster rate than the traditional health insurance and supermarket sectors, said Matt Wolf, director and healthcare senior analyst at RSM. Since 2014, Medicare Advantage enrollment has grown on a compounded annual basis of 7.3%, whereas the health insurance and supermarket sectors have grown by 4.7% and 0.7%, he said.
"With this mass customization of healthcare, there's been the realization that certain people will want to engage mostly virtually, others may need to go to the hospital more often and there are some who are perfectly fine with home care," Wolf said. "The ability to customize that experience for each member is going to be a critical competitive advantage for all organizations going forward in healthcare, whether they're payers or providers."
Anthem said it could not share much about its partnership with Kroger ahead of the 2022 enrollment deadline. But the deal will allow the Indianapolis-based insurer's more than 2.7 million Medicare enrollees—which include Medicare Advantage members as well as those enrolled in traditional, fee-for-service Medicare—access to Kroger Health's more than 2,300 pharmacy and specialty pharmacy sites and 200 clinics.
It also allows Anthem to get into people's communities without the real estate investment made by a company like CVS, which is also preparing to roll out its first jointly-branded product with Aetna next year. CVS' sites can provide a glimpse of the primary care services and the strategy that Anthem could be banking on, Wolf said.
By offering members another locale for eye exams, vaccinations, physicals and other basic services, Anthem could aim to catch member illnesses early and cut healthcare costs, Wolf said. This could also help its Medicare Advantage plans score better on federal quality metrics, which can help lure more members and bring in more revenue. It could even plan to eventually use data on what types of products an individual buys at Kroger to create individual benefits structures for enrollees, Wolf said.
"I'm sure that's not part of the initial arrangement, but as these organizations work together more closely I don't think it's that unrealistic of an endpoint," Wolf said.
Partnerships between insurers and retailers could also reflect the shifting dynamics of the supermarket industry, as more people avoid entering stores and opt for curbside pick-up, drone delivery or buy their groceries online from third-party services like Instacart. During Kroger's first-quarter earnings call on June 17, the Cincinnati-based retailer said sales excluding fuel decreased 4% year-over-year to $41.3 billion. Meanwhile, the company's digital sales grew 16% during the quarter.
Kroger could be betting consumers' new shopping preferences will leave the company more room in its stores, which it could devote to services and products related to the $3.8 trillion healthcare industry, Wolf said.
"The traditional grocery store model is a high-volume, low-margin business, and then you have this huge fixed investment in this large store with a lot of inventory," Wolf said. "You need as many people as possible walking through those aisles. This would be a way to get people into the store."
Insurers traditionally ink deals with retailers as a way to keep member acquisition costs in check, said Ari Gottlieb, a principal at the Chicago-based A2 Strategy Corp. consultancy. Well-established Medicare Advantage plans spend between $500 to $2,300 on marketing per individual member, according to a 2019 analysis he conducted of California Department of Managed Health Care filings. Paying for print and TV advertising can pay off for these plans—in the first half of 2020, Medicare Advantage plans earned an average of $222 per member per month, the highest amount of any plan offered, according to the Kaiser Family Foundation.
But as more organizations enter the Medicare Advantage market, the economic opportunity of each member decreases.
"This is a marketing ploy to differentiate more Medicare Advantage offerings and ultimately sell more of MA plans," Gottlieb said.