Health insurance companies that sell Medicare Advantage plans enjoyed higher star ratings, and the extra dollars that come with them, during the COVID-19 pandemic. That’s about to end.

Medicare Advantage carriers are prepping for the most difficult star ratings season since before the pandemic. The Centers for Medicare and Medicaid Services is set to resume the standard process for assessing quality, which it relaxed in response to the public health crisis, and to more heavily weigh consumer satisfaction when determining health plan performance. These looming changes threaten the big bonuses on which insurers came to rely to differentiate their offerings in the crowded market for private Medicare plans through richer benefits and lower premiums.

As part of pandemic relief, CMS relaxed how it calculated Medicare Advantage star ratings for 2021 and 2022. The result was a record number of insurers gaining higher scores on the program’s five-point scale, and a corresponding increase in federal spending on bonuses.

Medicare Advantage plans will receive an estimated $10 billion in bonus payments in 2022, more than triple the $3 billion they received in 2015, according to data compiled by the Kaiser Family Foundation. In 2021, CMS paid out $9.2 billion in bonuses, $2 billion more than the year before, which was the greatest increase in seven years.

From 2020 to 2022, 21% of plans experienced a one-point change and 56% of plans’ ratings grew by half a point. Six insurers’ star ratings increased by at least one-and-a-half stars, according to a Modern Healthcare analysis of federal data. One insurer’s rating grew two stars. Now that the COVID-19 flexibilities have ended, these companies could see big decreases in their ratings, which would translate to less Medicare Advantage revenue.

Plans operated by Blue Cross and Blue Shield of North Carolina, Blue Cross and Blue Shield of Rhode Island, two Medicare Advantage products operated by Highmark Health and Centene’s Wellcare of South Carolina all experienced one-and-half star increases. Catholic Special Needs Plan, an insurer owned by Catholic Health Care System, was the only insurer that’s ranking increased by two stars.

Highmark Health declined to comment on its upcoming star ratings, but has said it expects its scores to decline. In addition to the resumption of pre-pandemic standards, CMS will place greater weight on the Consumer Assessment of Healthcare Providers and Systems surveys this year, which adds more uncertainty to the scores, said Bill Rayball, vice president of quality for senior markets at Highmark, which has 438,000 Medicare Advantage members. CMS tallies approximately 50 clinical outcome and patient experience measures to determine an insurer’s overall score.

“We’re constantly reevaluating and evolving because the four-star threshold [for bonuses] gets harder and harder to achieve each year,” Rayball said.

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Blue Cross and Blue Shield of Rhode Island also declined to comment on its upcoming star scores. Centene, which did not respond to an interview request, has said it expects to lose more stars than the industry average. Blue Cross and Blue Shield of North Carolina expects to achieve “high performance” in the program this year, a company spokesperson wrote in an email. Catholic Special Needs Plan did not respond to an interview request.

Cigna and Clover Health have said they expect a drop in their stars for the year ahead. UnitedHealthcare and Humana, which collectively control 45.6% of the Medicare Advantage market, declined to comment.

Medicare Advantage plans received previews of their ratings last week and have until Thursday to alert CMS about any suspected data calculation errors. CMS will reveal star ratings next month ahead of open enrollment, which runs from Oct. 15 to Dec. 7.

Not just COVID-19

The Medicare Advantage star ratings program is designed to help Medicare beneficiaries shop for coverage. But research has shown very few consumers actually use it. But the program nevertheless has benefited insurance companies with high ratings because of the bonuses they receive. Plans that score at least four on the five-point scale get 5% increases to their benchmark payments. Plans that earn five stars receive 5% bonuses and can market their products all year, which gives them an edge over rivals that are limited to promoting plans during open enrollment.

“The stakes are really high financially,” said Melissa Smith, executive vice president of consulting and professional services at HealthMine, a consultancy for health insurance companies.

While it will be tempting for insurers to blame a ratings decrease solely on the end of the COVID-19 relief, ratings likely also will decline for unrelated reasons, Smith said. The public health emergency compelled insurers to prioritize digitizing their operations over investing in quality, she said. Medicare Advantage insurers’ average rating across metrics will decline by 65% this year, according to a HealthMine analysis.

Insurers that lose a significant amount of stars revenue will likely increase premiums for 2024 or exit the market, Smith said.

“We’ll see some plans getting real with themselves about whether they belong in Medicare Advantage,” Smith said. “There has been a very extreme proliferation of plans in the last five years and a lot of them are struggling to find experts to run their plan, get a toehold of large membership volume and cope with an environment of extreme technical modernization in every aspect of health plan operations.”

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Giving more weight to consumer surveys will disproportionately affect large insurers because it is harder to scale individualized care programs across large memberships, Smith said. Over the past few years, many insurers had been folding lower-rated plans into higher-rated contracts to harvest the stars’ quality bonus revenue. As such, large contracts have come to dominate the Medicare Advantage stars program. CMS has been closing the regulatory loopholes that allow this practice, which will likely slow growth in behemoth contracts, she said. “They’re all pretty exposed right now, and they pretty much all know it,” she said.

Smaller health insurance companies are watching, too.

Fallon Health, a not-for-profit insurer that has maintained at least a four-star rating since the program began in 2009, depends on the bonuses it receives to reduce premiums and offer supplemental benefits to its 23,000 Medicare Advantage members, said Sonja Brehm, vice president of customer experience and analytics. The company has established a working group to analyze scores and is “actively monitoring and reviewing its preview data for 2023,” she said.

“The reality is that these are measures that are reflecting our performance as a health plan in aggregate, and it’s a very competitive environment,” Brehm said. “You’re not only performing against your own individual plan, you’re actually competing against how everybody else is performing in the marketplace.”

The increased focus on patient experience reflects CMS’ larger goal of bridging healthcare disparities, said Kristin Rodriguez, CEO of the Health Plan Alliance, a for-profit insurance advisory started by provider-owned health plans. In 2017, CMS launched Meaningful Measures, a plan to streamline insurers’ administrative processes related to the stars program, encourage value-based care and modernize metrics. The agency also aims to incorporate digital quality measures.

Health Plan Alliance members do not expect the change to the Consumer Assessment of Healthcare Providers and Systems scores to cause a dramatic decline their star ratings, Rodriguez said. But another pending modification to how ratings are assessed may have a greater effect, she said.

CMS aims to minimize year-to-year fluctuations in star ratings by eliminating outliers from its calculations of how Medicare Advantage plans perform on the metrics that comprise overall scores. Each individual measure is assigned a threshold—called a “cutpoint”—above or below which determines its weight in each star plan’s star rating. This could disadvantage companies teetering between scores, Rodriguez said.

“The change of the cutpoint means that the margin for error is much tighter,” Rodriguez said. “Our plans, in proportion to the population in the markets that they serve, they have a smaller slice of that market.”

Tim Broderick contributed to this story


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