2020 Medicare Advantage Outlook

On April 1st CMS published the final call letter for Medicare Advantage which indicates Medicare Advantage reimbursement rates will rise on average by 2.53%, a little less than a 1% increase over the draft call letter. This is a good thing and in general would mean we will see a positive impact on rates and benefits for 2020. There is however an additional significant change for 2020 that could push things in the opposite direction. The Health Insurance Tax (HIT) is coming back in 2020, and that’s a big negative.

The ACA’s HIT applies to all insurers offering fully insured coverage, including plans sold via the on-exchange and off-exchange individual market, large and small group markets, and any insured public programs, including Medicare Advantage, Medicare Part D, and Medicaid Managed Care. In January 2018, Congress passed a one-year suspension of the tax, eliminating the tax for 2019 and we saw the positive impact on rates and benefits in Medicare Advantage products for 2019. With the moratorium set to expire for 2020, insurers will set rates that will accommodate the estimated $16 billion in additional fees.

According to an analysis by Oliver Wyman, the premium impact of the health insurance tax for 2020 will negatively impact Medicare Advantage enrollees by $241 annually or about $20 Per Member Per Month (PMPM), a very significant number.  This will have to be achieved through higher premiums or reduced benefits.  Medicare Advantage Annual Bids are due from insurers to CMS on June 3, just two months from now. While there is a push to suspend the HIT for 2020 it is unlikely to happen in the short amount of time so be prepared to see rates go up and benefits go down in 2020.