How to Launch a Provider-Sponsored Medicare Advantage Plan

Medicare Advantage enrollment continues to grow. In 2023, nearly 31 million people are enrolled in plans, accounting for 51% of those eligible for Medicare. The Congressional Budget Office (CBO) expects enrollment growth to continue, with Medicare Advantage enrollment to reach 62% of Medicare-eligible seniors by 2033.

Though competition has increased – the average beneficiary has a remarkable 43 plans to choose from – that expected growth has many providers contemplating introducing a Medicare Advantage plan.

Here’s a look at what it takes to launch a provider-sponsored Medicare Advantage plan: 

Why Launch a Provider-Sponsored Medicare Advantage Plan?

Though provider interest in provider-sponsored Medicare Advantage plans tends to wax and wane, a 2019 Healthcare Financial Management Association survey found that nearly 20% of health systems surveyed planned to launch or partner on a provider-sponsored health plan, and 25% were already part of one. 

Align Care and Coverage 

Though traditional insurers like UnitedHealthcare, Humana, and Blue Cross and Blue Shield hold a large share of Medicare Advantage enrollment, provider-sponsored plans like Kaiser, Geisinger, UPMC, and Tufts Health Plan are among the fastest-growing. Research shows that provider-sponsored health plans often outperform insurance peers in member satisfaction by aligning care and coverage. 

Capture More of Premium Dollar

Shrinking Medicare margins and growing insurer consolidation have threatened many health systems. The Centers for Medicare and Medicaid Services (CMS) pays plans a monthly fee to manage Medicare Advantage beneficiaries. Plus, most health insurers cite Medicare Advantage plans as their most profitable market – often double that of group or ACA markets. As a result, investing in a provider-sponsored Medicare Advantage plan can help health systems collect more of the premium dollar at relatively high profit margins.

Align with Community Needs 

Though we noted that 51% of eligible Medicare Advantage seniors have enrolled in a plan, that penetration varies considerably by state and even within states. For example, most of the Dakotas, Wyoming, Nebraska, and Kansas have fewer than 20% of eligible members enrolled in Medicare Advantage plans. 

As a result, those communities may need a provider-sponsored Medicare Advantage plan with a local health system. Those health systems may be able to quickly gain market share due to limited options, brand recognition, and relatively low Medicare Advantage enrollment.

Convinced the benefits of a provider-sponsored Medicare Advantage plan outweigh the risks? Here are five tips to consider when launching a Medicare Advantage plan.

Study the Feasibility

Start by assessing your market. In which counties would you consider selling Medicare Advantage plans? What kind of market share can you expect? How do the benchmarks – the expected monthly capitated payments in a specific county – compare to anticipated costs? 

When estimating your market share, consider this Milliman study that analyzed the enrollment performance of 28 Medicare Advantage organizations that first entered the market in 2015 to understand their five-year growth. Enrollment ranged from 0.1% to 8% of total Medicare eligibles in their market, with the average organization garnering about 1.16% of eligible employees by year 5.  

Next, consider your network. Would you be able to build a network that meets network adequacy requirements? If you contract outside your health system, will they work with you on initiatives to improve Medicare Advantage Star Ratings?

Ruminate about products. Analyze what competitors in your target counties offer. Can you be competitive and remain profitable? What optional supplemental benefits – like fitness, dental, vision, or transportation – can you add to make your product more attractive and help you achieve your enrollment goals?

Consider your administrative expenses. What sales and marketing costs will you incur? Will you need a TPA? How much will Medicare Advantage premium billing software cost if your products don’t have $0 premiums?

Then, start to develop your Medicare Advantage marketing strategy. Will you target specific populations? Do you understand and have compliant marketing practices? How will you go to market? What will you need to do to meet your initial enrollment goals?

Understand capital requirements. Creating a new Medicare Advantage plan isn’t easy. Do you have the capital necessary to do so? If not, read on for alternative options to entering the market that may be less capital intensive.

Perform a Gap Analysis

If the feasibility study finds you should launch a Medicare Advantage plan, consider where your organization may have gaps. Be honest – most provider-sponsored Medicare Advantage plans have a painful insurance market entrance because it’s not a core competency. So analyze where you have gaps in your organization.

Those gaps may be significant. You may need underwriting, sales and marketing, product design, more administrative workers for billing and member service, and network development professionals. You may also require additional technology solutions like a core admin solution, enrollment software, billing software, and member-facing software. 

Identify gaps and understand the costs and expected timelines necessary to address them.

Build vs. Buy vs. Partner

You have options when it comes to creating your Medicare Advantage plan. They include:

Build

You can build your plan wholly in-house. The insurance industry can be capital-intensive and highly regulated, so building may be the most expensive way to enter the market. Because you’ll need the resources identified in your gap analysis, you’ll experience a relatively long time-to-market. It will likely take at least three years to launch your provider-sponsored Medicare Advantage plan.

Buy

Buying an existing insurer can be the fastest way to go to market. It may be expensive – insurers have high valuations – and you may have to overcome regulatory hurdles in an acquisition. However, buying reduces many growing pains associated with building a health plan if you buy an experienced insurer.

Partner

Several providers have decided to partner, creating joint ventures, tighter collaboration, or co-branded products with health insurers or even other providers. These partnerships can be less capital intensive but may introduce some risk as there can be more moving parts and less control. If you partner, complete your due diligence because a poor partner can have dire consequences.

Licensure and Compliance

As we mentioned, the insurance industry is highly regulated. You’ll likely need to be licensed and have a robust compliance team to be successful. To start a new Medicare Advantage contract, you’ll need to complete an initial Notice of Intent to Apply, an application, and then manage the bidding process.

Additionally, Medicare Advantage organizations require a license under state law as a risk-bearing entity. Some states may take a year or more to issue a license. You’ll likely need to prove your financial solvency by using projected enrollment to prove you meet capital requirements.

Once you’ve created your plan, ensure compliance with prior authorization, appeal, and grievance requirements. You process enrollments promptly and maintain specific enrollment demographics. Communications must follow specific guidelines and be timely and accurate. Summary of benefits, evidence of coverage, provider directories and more need to be actively managed according to specific guidelines.

Quality Matters

Plans with 4-star or greater Star Ratings have a distinct advantage in the Medicare Advantage market. Not only do they earn bonus payments, but they also tend to attract more enrollees. The quality of your plan – as judged by Medicare Advantage Star Ratings – can significantly impact your bottom line.

Unfortunately, Star Rating measures are constantly in flux. A few years ago, CMS more heavily weighted certain member satisfaction levels. Those will soon give way to performance measures more focused on equity. Though many core measures remain the same, their weight in the overall score may change.

Invest in quality improvement programs aligned with Star Rating measures to maximize those ratings and your revenue.

Certifi’s health insurance premium billing and payment solutions help healthcare payers improve member satisfaction while reducing administrative costs.

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