Medicare Advantage Profitability: 4 Ways to Improve It

It seems like every week there’s a story about a Medicare Advantage plan expanding into a new state or new counties. Competition has definitely increased, with the average beneficiary having 39 different plans to choose from in 2022 according to a KFF analysis. That increased competition may make it difficult for the average Medicare Advantage plan to grow enrollment.

But you can still improve profitability. Here are 4 ways health plans can increase Medicare Advantage profitability:

Compete with Enhanced Benefits

If you’ve ever bought a car, you’ve probably heard a sales representative try to throw in a few free oil changes in order to get you to sign up for a maintenance plan or extended warranty. Why? Because the oil changes are relatively inexpensive to perform while the maintenance plan is wildly profitable.

Like that car dealership, think of unique benefits you can offer that are low cost but appealing to potential members. Examples may include:

  • Digital Health Tools — Items like low-cost health and fitness apps or online communities that encourage healthy activities can deliver value to members without significant capital outlays.
  • Community Partnerships — Helping members access community resources can improve the member experience at a low cost. For example, enabling referrals to local agencies for food programs or community activities that can alleviate loneliness.

Be Smart About Expansion

When Dollar Shave Club launched in 2012, Gillette dominated the razor market with a 70% share. By 2019, Gillette’s share had eroded to just over 50% while Dollar Shave Club was purchased by Unilever for $1 billion.

How’d they accomplish it? They were smart about their growth strategy, identifying a new market — the internet — in which they could outcompete Gillette. But they also had a better customer experience, buying razors directly from Asia and shipping them to consumers’ homes, eliminating the middle man — a retail store — that drove up the price.

Medicare Advantage plans also need to be strategic about their territorial expansion plans. A combination of differentiated products, a growing Medicare Advantage-eligible population, and underperforming competition may be a sign of a territory ripe for expansion. But it’s also important to analyze potential providers’ abilities to integrate into your value-based care arrangements. If they can, it’s more likely you can gain market share, improve health outcomes and ultimately improve your profitability.

Improve the Billing Process

Consumers today expect simple billing processes, whether that’s an online purchase at Amazon or a monthly Medicare Advantage premium payment. If you limit their payment options, it’s more likely they’ll be delinquent. If it’s difficult to make a one-time online payment, it’s more likely you’ll the member will be delinquent. You need to get paid — and continue to grow membership — in order to improve profitability, so any termination related to non-payment can impact your profitability. Improving the billing process is an underrated tactic that can improve profitability.

Many Medicare Advantage plans use underperforming legacy billing systems or core admin system billing modules that lack features of modern billing solutions. Things to look for:

  • An accounting-based design. System architecture matters. Point-in-time billing is less robust than account-based billing designs. Why? Because accounting-style designs tie debits and credits together so financial transactions balance. That improves and automates any retroactive adjustments. It also leads to better, more granular reporting.
  • Robust payment options. The more payment options you offer, the more likely you’ll receive payment on time. Options include one-time credit/debit or ACH payments and the ability to set up recurring payments. Offering multiple payment date options — like the first, 10th, or 15th of each month — gives members the flexibility to choose which date to withdraw funds. A cash pay option where members can take your invoice to their local Walgreens to make a payment can also improve payment rates while limiting terminations.
  • An easy-to-use payment portal. Don’t forget to simplify online payments. Whether it’s a one-time payment that members can make without logging in or a single-sign-on (SSO) integration to your payment provider to eliminate the need for an additional password, simplifying the online payment process makes it more likely a member will make a payment.

Focus on Quality Improvement

Amazon’s user reviews started a revolution in the way consumers shopped for products. Instead of relying on slick marketing or sales representatives to determine which product to buy, they relied on the experiences of other users to determine which products perform better. As a result, higher-rated products are much more likely to sell than their lower-rated counterparts.

Medicare Advantage is no different. Medicare Advantage star ratings provide a way to judge plans based on a number of criteria. To no one’s surprise, studies have shown that higher-rated plans are more likely to see enrollment gains when compared to their lower-rated counterparts. Ultimately, improving the quality of your plans can lead to enrollment gains and improved profitability. Quality improvement may include:

  • Improving clinical measures by ensuring members are completing screenings — like osteoporosis and breast cancer — vaccinations and other exams.
  • Improving the member experience by ensuring that they can get appointments and necessary care quickly and that your customer service team is rated highly.
  • Ensuring that you improve your administrative measures, like appeals and complaints.

By focusing on quality improvement and achieving higher Medicare star ratings, you’ll be more likely to experience profitability gains.

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


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