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@Election Results May Mean Growth for MA, Medicaid Insurers

Reprinted with AIS Health’s permission from the November 15, 2018, issue of Radar on Medicare Advantage

Health care was a pivotal issue during the recent midterm elections, and with the Democrats on Nov. 6 winning back control of the House, the GOP’s plan to repeal and replace the Affordable Care Act is presumably off the table. And given some key outcomes on a state level, there’s now potential upside for Medicaid managed care organizations as six states may pursue Medicaid expansion. As for Medicare Advantage plans that are in the middle of the 2019 Annual Election Period (AEP), they’ll be happy to cut the noise and get back to business, industry experts tell AIS Health.

“The election was a pretty big distraction for market share growth for the AEP,” says Jeff Fox, president of Gorman Health Group, who heard from health plan clients that enrollment slowed down. With mixed messages in the media about the Affordable Care Act, pre-existing conditions and “Medicare for All,” “seniors were confused about what’s real and tend to assume a lot of these things pertain to them, so agents were out there trying to explain what’s going on and it was tough from a sales perspective.”

Fox adds, “We knew the elections were going to impact the early sales in MA, but now that the noise is off the TV, off the radio, out of the mailboxes, plans can get back to focusing on their market share opportunities for 2019. And seeing how crazy this election was made them realize how crazy it’s going to be in two years, so I think plans will really dial in on market share opportunities in 2019 and 2020, because who knows what’s going to happen in two years?”

“I see companies putting in a much bigger stake and effort around Medicare, and I think MA will just continue on an upward trajectory. It’s a stable market on an uptick,” weighs in Lindsay Resnick, executive vice president at Wunderman Health, which provides data analytics and technology-enabled marketing to national and regional MA plans.

And as discussions around Medicare for All — and what it means — continue, Resnick says he sees that bringing even more attention to MA as a model of public-private partnership. “Although I don’t expect any action around Medicare for All, it’ll be a policy debate in the 2020 elections. The problem right now is Medicare for All isn’t really defined consistently,” he adds.

Meanwhile, experts agree that Medicaid expansion was the big winner in the elections. Had Republicans maintained full control of Congress, “there would have been a very robust [Affordable Care Act] repeal attempt, but I think overall it was a very good night for Medicaid because of [the outcome in the House] and because of the expansion potential in red states,” suggests Jerry Vitti, president and CEO of Healthcare Financial, Inc., a Boston-based firm that specializes in enrolling the uninsured into health programs.

Voters in Idaho, Nebraska and Utah on Nov. 6 approved measures to extend Medicaid coverage to an estimated 62,000, 90,000 and 150,000 residents, respectively (see infographic, p. 7). And with Democratic governors elected in Kansas, Maine and Wisconsin, those states may seek out or revisit earlier expansion efforts. Kansas, for one, elected consistent Medicaid expansion supporter Laura Kelly (D), after expansion in 2017 was passed by state lawmakers but vetoed by then-Gov. Sam Brownback (R).

Expansion Is a ‘Win’ for Plans, Enrollees

Expansion in states with a managed Medicaid structure is a “win for plans” as well as beneficiaries, “because managed care plans have robust systems and incentives to keep people out of hospitals and out of expensive treatment centers by providing care and coverage in the community,” remarks Vitti. Insuring more people and getting them into managed care will also help states deal with the opioid crisis, he suggests.

While plans in expansion states will gain additional members, Vitti points out that the childless adult expansion population is made up of very high-cost patients who often have unmet mental health, substance use disorder or other complex medical needs. Newly expanding states will “see a spike in emergency room use and other services at first as the unmet demand gets met,” he predicts. “While it’s all a function of the rates, my sense is that plans do not pick up a financial benefit at least early on in the enrollment and care that they have to pay for for these folks.”

Another potential issue is churn. “There’ll be some folks that are new to the plans, so the churn rates I think are going to be higher in this new population because they’ll just have these complex issues and they’ll be the least able to advocate for themselves and to comply with paperwork, work requirements and other kind of conservative principles of reform,” adds Vitti. “To me, the programmatic and financial implications [of expansion] are pretty clear and the benefits out there to folks are clear, as long as the states have robust administrative systems.”

If all six states expanded, it would lead to about $3 billion in incremental spend and an earnings per share impact (EPS) of about 1% or less for each MCO in the near term, estimated Barclays Capital securities analyst Steve Valiquette in a Nov. 12 research note.

Should all remaining 14 states adopt Medicaid expansion, an estimated 7 million people would gain coverage, resulting in $35 billion in incremental spend, he added. “Among these states, the MCO opportunity is highly concentrated in Florida, Georgia, and Texas, collectively accounting for more than 50% of the total opportunity,” he wrote. “The Governorship in all three states will remain under Republican control [barring any recounts in Florida and Georgia], leaving current political resistance to expansion largely intact.” Nevertheless, Barclays estimated that if all remaining states expanded, the EPS potential for key MCOs like Centene Corp., Molina Healthcare, Inc. and WellCare Health Plans, Inc. would be in the low-to-mid double-digit percent range.

Contact Fox at jfox@gormanhealthgroup.com, Resnick at lindsay.resnick@wunderman.com, Valiquette at steve.valiquette@barclays.com or Vitti at gvitti@hfihealthcare.com.

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