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Oct 16, 2024

How the 2025 Medicare Advantage ratings might affect enrollment | Modern Healthcare

Medicare Advantage insurers have been buffeted by regulatory and market shifts that squeezed their finances and spooked investors over the past year or so. But with open enrollment for 2025 starting

Medicare Advantage insurers have been buffeted by regulatory and market shifts that squeezed their finances and spooked investors over the past year or so. But with open enrollment for 2025 starting Tuesday, it appears the competitive landscape will hold steady.

The monetary consequences of sinking Medicare Advantage star ratings are real, and insurers have taken risky steps to steady their finances by tweaking plan design for next year that may or may not pay off. Yet market leaders UnitedHealthcare and Humana are likely to remain at the top of the heap. Competitors from national carriers such as CVS Health subsidiary Aetna and Elevance Health to regional insurers such as Highmark Health and Florida Blue will split the remainder.

Related: Humana, UnitedHealthcare, Aetna fall in new MA star ratings

Even smaller quality scores won't knock UnitedHealth Group subsidiary UnitedHealthcare and Humana of their perches, said Duane Wright, senior research analyst at Bloomberg. Brand recognition, big marketing budgets and customer stickiness matter, he said.

“You probably will not see a huge shift towards some of these other companies, just because they're not as well-known,” Wright said. “The bigger plans have the most money so you're probably seeing their names more, and you probably have some previous experience in the commercial market with these companies.”

UnitedHealthcare and Humana have led Medicare Advantage market share for at least a decade and cover a combined 47% of Medicare Advantage enrollees this year, according Centers and Medicare and Medicaid Services data compiled by KFF, a health policy research institution.

The Medicare Advantage Star Ratings program has huge financial implications for carriers. But for beneficiaries, not so much. Research has shown that consumers do not look at the scores when researching plans — if they shop around at all.

Last year, 69% of Medicare beneficiaries did not review their options for fee-for-service Medicare or Medicare Advantage, including 65% of Medicare Advantage customers, KFF reported last month. And just 16% of people who comparison-shopped during open enrollment for 2024 actually changed plans, according to a report the healthcare marketing intelligence company Deft Research published in January.

Medicare beneficiaries are much more likely to base their decisions on costs and benefits than on star ratings, said Nick Herro, a senior partner at the Chartis Group, a consulting firm.

“The reason Medicare Advantage is so popular is because it's affordable and it offers a rich complement of benefits. As that changes, that will drive consumer shopping and then switching — not the MA stars,” Herro said.

Consumers don’t understand what star ratings are or how they work, said Gretchen Jacobson, vice president of the Medicare program at the Commonwealth Fund, a think tank.

When Medicare beneficiaries do take the time to look at what the Star Ratings program measures, the metrics may not be relevant to them, Jacobson said. For example, most Medicare Advantage enrollees will not need post-acute care, but CMS scores insurers on how well transitions are managed.

“Is the audience for these ratings to help with oversight and to reward [plans] for delivering high-quality care, or is the audience that beneficiary to help them choose a plan?" Jacobson said. “What beneficiaries want may be different from what CMS wants, and really requires, for oversight.”

Another issue is that star ratings rose over time, and so many companies had high scores that differentiating between them became difficult for consumers, said Michael Bagel, associate vice president of public policy at the Alliance of Community Health Plans, a trade group for nonprofit insurers.

“If I look for a product and everything there is a 4.5 star, at some point, my eyes glaze over. I believe they're all good,” said Bagel, who described this as the "Amazon effect,” akin to Amazon.com customer ratings on products.

Nevertheless, high star ratings are critical to insurers seeking bonus payments that enable them to load up plans with extra benefits that fee-for-service Medicare doesn't have, which is a major reason people choose Medicare Advantage.

It's also just a lot of money. UnitedHealthcare’s 2025 ratings slide, for example, will cost the company $1.4 billion in bonus payments next year, according to an analysis the investment bank TD Cowen published Thursday. Humana saw an even bigger drop in its star ratings and potential bonus payments.

Although the effects of CMS' tougher star ratings criteria may not be strongly felt during the 2025 plan year, large insurers losing revenue could allow smaller rivals to take advantage of those struggles and develop superior products, which could shake up competition down the line, Bagel said.

“We're still going to see significant enrollment in the big nationals. But their grip on enrollment will loosen up a little bit in '25 and even more in '26 and beyond,” Bagel said.

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