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Medicare Advantage Enrollees May Have to Switch Plans to Keep Costs Down

By Rebecca Adams, CQ HealthBeat Associate Editor

November 25, 2013 -- Insurers squeezed by the health law could be bumping up costs for Medicare enrollees who get their coverage through private plans, said a recent study.

But many beneficiaries in the Medicare Advantage program can avoid cost increases by switching plans, says the report by the non-partisan Kaiser Family Foundation.

"The uptick in premiums for enrollees who do not switch plans, and the increase in average out-of-pocket limits, may be a response by insurers to the payment reforms" in the law (PL 111-148, PL 111-152), said the analysis. "Additional research is needed to explore whether plans are making other changes in 2014 to constrain costs, for example, by increasing cost-sharing requirements for individual services or narrowing provider networks, which might have important implications for beneficiaries."

The law calls for reductions in payments to Medicare Advantage plans and for the addition of new taxes on insurance plans in 2014.

The amount that individuals will have to pay out of their pockets before insurers pick up the rest of the tab is growing by about 11 percent, from an average of $4,333 this year to $4,797 in 2014, according to the report.

If beneficiaries stick with the same plan, the increase in the out-of-pocket cap is higher: about 15 percent, from an average of $4,294 in 2013 to $4,900 in 2014.

The same trend is seen with monthly premiums. Beneficiaries who change plans could actually see a reduction in their costs, from an average of $51 per month this year to $49 per month next year. But people who do not switch "will find that, on average, their premiums will increase by almost $5, from $35 to $39" per month, said the report.

But most seniors and other beneficiaries get comfortable with one company and don't want to switch.

One small group of people—about 526,000 individuals or 5 percent of the Medicare Advantage population—will have no choice. They will have to pick a new plan because their insurance will not be offered in 2014. But the study finds that about 91 percent of them "should have little problem finding a substitute plan with similar characteristics." And often the alternative will be offered by the same company.

Virtually all—about 99 percent—of beneficiaries in plans that are withdrawing from their area will still have at least one Medicare Advantage plan in their area, said the report.

Otherwise, the market will be similar to what beneficiaries saw this year. Consumers will have a choice of about 18 plans in 2014 on average, two fewer than in 2013, the analysis said.

Analysts initially predicted the health law would cause a sharp drop in Medicare Advantage enrollment, but that hasn't been the case because of the popularity of the plans among retiring baby boomers.

However, cuts are beginning to deepen. Plans may adjust by shifting costs to their enrollees or tightening their networks of doctors and other providers.

Recently, UnitedHealth Group said it planned to cut its provider network by 10 to 15 percent by the end of 2014. And America's Health Insurance Plans has been trying to mobilize Medicare Advantage enrollees to support funding for the program as lawmakers eye cuts to Medicare entitlement spending.

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