A legal fight between four Pennsylvania health systems and Aetna could upend how Medicare Advantage insurers manage costs for supplemental benefits.
Bridges Health Partners, a clinically integrated network in western Pennsylvania, filed a lawsuit in state court Wednesday alleging CVS Health subsidiary Aetna broke contract terms by categorizing extra benefits such as gym memberships and CVS gift cards as medical expenses.
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If the plaintiffs prevail, it could compel Aetna and other Medicare Advantage carriers to reconsider what perks they offer and how they account for expenses.
Bridges Health Partners assumed $6.2 million in costs related to Aetna supplemental benefits in 2023, up more than 20-fold from $300,000 three years prior, President and Chief Medical Officer Dr. Robert Zimmerman said. The plaintiff is seeking a declaratory judgment to stop Aetna from passing on the cost of these extra benefits to its health system partners for the remaining two years of its contract.
Bridges Health Partners comprises Greensburg-based Independence Health System, Pittsburgh-based St. Clair Health, Pittsburgh-based Genesis Medical Associates and Washington-based Washington Health System. The company asserts that Aetna's alleged actions deprived those providers of shared savings under a value-based care arrangement.
Aetna declined to comment.
“We see these programs such as the gift cards and gym memberships — they're more a marketing ploy by Aetna to get more beneficiaries, and that really should not be included as a medical cost,” Zimmerman said. “As providers of healthcare, we can control quality, we can control cost, we can control utilization, we can control a lot of things. But we can't control these supplemental benefits.”
If the court rules for Bridges Health Partners, that could increase costs for Aetna and other Medicare Advantage carriers that have come to rely on benefits not available under fee-for-service Medicare — such as vision and dental coverage, fitness club dues, and transportation to medical appointments — to attract and retain members.
The Pennsylvania lawsuit could spoil that strategy, said Jack Slevin, a health services equity research analyst at investment bank Jefferies.
“In some ways, the plan is taking a margin on their own marketing cost,” Slevin said. “It sounds pretty reasonable that this shouldn’t be passed on, but that’s obviously not what’s happening.”
Rising Medicare Advantage expenses could spur similar lawsuits from other providers, said Rick Kes, a senior healthcare industry analyst for the consulting company RSM. "Providers are becoming more sensitive to the mechanics of the medical cost calculation, where in the past maybe they weren't,” he said.
For instance, value-based care companies such as Agilon Health and CareMax have lamented that rising supplemental benefit usage negatively affected their profit margins last year, which spurred them to seek new deals with insurers to blunt the impact, either through more favorable risk-sharing arrangements or through higher payments.
Medicare Advantage insurers are facing higher medical costs driven by an unexpected spike in utilization in late 2023, and the Centers for Medicare and Medicaid Services slightly reduced the benchmark payment rate uder the program for next year. Health insurance companies including Aetna and Centene have threatened to scale back benefits, hike premiums or cut provider pay next year to compensate.
But supplemental benefit spending may increase next year under a final rule CMS published this month that requires Medicare Advantage insurers to notify beneficiaries about unused benefits, Kes said.
