Kaiser, UnitedHealth pocket big Medicare Advantage star bonuses: report

Kaiser Permanente will receive the biggest per-member bonus from the Medicare Advantage star ratings program in 2023, an analysis found.

The Centers for Medicare and Medicaid Services will pay the integrated health system's insurance arm $523 per member for its high performance in the federal quality bonus program, according to a report published by KFF Wednesday.

Kaiser Permanente will receive $966.8 million because 99% of its policyholders were enrolled in Medicare Advantage plans that scored at least four out of five stars during the 2022 plan year, the report said. In addition to Kaiser Permanente generating the greatest per-member ratings returns, the insurer also had the greatest percentage of enrollees in the high-rated plans, the report said.

Kaiser Permanente did not respond to an interview request.

Carriers that meet CMS’ four-star threshold receive the biggest bonuses from the quality ratings program, and insurers rely on those funds to offer zero-premium plans and supplemental benefits. Because CMS’ payment for the program lags a year, the bonuses carriers receive this year reflect their performance in the 2022 plan year.

Regulators paused their stringent evaluations of several of the program’s quality measures during the COVID-19 pandemic, leading a record number of plans to achieve four-star scores. 

CMS tightened its evaluations of Medicare Advantage insurers’ quality metrics for the 2023 plan year, and as a result, nearly 20% of carriers lost bonuses. Next year, insurers will likely receive fewer bonuses because of slips in ratings, the report said.

UnitedHealthcare will earn the second-highest bonus of $439 per member, with 89% of its Medicare Advantage policyholders enrolled in high-performing plans, the report said. The company is the largest Medicare Advantage carrier and will generate $3.9 billion from the stars program, the most of all carriers. UnitedHealth did not respond to an interview request.

Cigna will receive $432 per member. The insurer operates a relatively small Medicare Advantage business that will generate $247.3 million from the stars' program this year, according to the report. Cigna did not respond to an interview request.

Humana will earn $412 per enrollee, the report said, but its size helped it generate the second-greatest stars bonus. Humana and UnitedHealth control nearly half of the Medicare Advantage market. And combined, the two companies will receive 49% of the $12.8 billion CMS pays in bonus payments this year, the report said. CMS will pay at least $2.8 billion, or 30% more, to carriers this year than in 2022.

"For five consecutive years, we have had the highest percentage of members in 4+ Star contracts of all national health plans," a Humana spokesperson wrote in an email.

Companies that offer employer-sponsored Medicare Advantage plans for retirees will receive the largest average per-member bonus, while carriers that operate special needs plans will receive the lowest average per-member quality payment, according to the report. Medicare Advantage carriers that insure members dually eligible for Medicare and Medicaid have said their policyholders' multiple comorbidities and heightened social determinations of health needs can act as barriers to performing well in the program, compared with non-dual eligible special needs Medicare Advantage plans.