Health insurers across the U.S. will race to enroll more seniors in lucrative government-backed Medicare plans this month, even as a roiling debate over the role of private companies in health coverage shapes the presidential race.
The plans, known as Medicare Advantage, are the private-sector, taxpayer-financed alternative to traditional Medicare. Selling them has become a crucial profit center for the insurance industry: Baby Boomers are aging into the program, propelling its growth, while at the same time health insurance products sold to people under 65 are facing pressure from all sides.
The private plans also sit squarely in the middle of the race for the presidency: Some candidates for the Democratic nomination, including Senators Bernie Sanders and Elizabeth Warren, have backed a proposal to do away with private health insurance across all markets. Last week, President Donald Trump signed an executive order aimed at bolstering Medicare Advantage, and said Democrats would upend the program.
In 2019, about 22 million people, or roughly a third of all Medicare enrollees, got their Medicare coverage through the private plans. For each person who signs up, the insurers collect a fee from the government. It was $11,545 on average this year, which adds up to about $254 billion. The Medicare Advantage enrollment period opens Oct. 15.
Insurers see it as a lucrative market they can’t afford to pass by. Medicare products are the biggest business at the biggest health insurance company, UnitedHealth Group Inc.’s insurance unit. Centene Corp. agreed to pay $15 billion this year for WellCare Health Plans Inc. in part to get access to the company’s large Medicare business. Startups like Clover Health, which has raised more than $900 million from investors including GV, Alphabet Inc.’s venture capital arm, are targeting Medicare customers with new technologies intended to deliver care more efficiently.
UnitedHealthcare will sell Medicare coverage in 100 new counties in 2020, reaching 90% of the eligible market. Humana Inc., which specializes in Medicare Advantage, will expand to 29 new counties. Humana Chief Executive Officer Bruce Broussard told investors in July that membership was growing at the fastest pace in a decade, and the company expects to add half a million members this year. Cigna Corp., which has a comparatively smaller Medicare business, is expanding to 37 new counties next year and projecting 10% to 15% average annual membership growth through 2025. CVS Health Corp.'s Aetna unit is expanding to 264 new counties in 2020.
Medicare is especially critical to insurers as their traditional business selling health plans to employers and individuals slows. A smaller percentage of the U.S. workforce is enrolled in employer coverage than two decades ago, according to data from the Kaiser Family Foundation, a nonprofit health research group, as the cost of those benefits rises faster than workers’ earnings.
“We all know that 11,000 Americans turn age 65 every day and then the percent of those that choose” Medicare Advantage is accelerating, Anthem Inc. Chief Financial Officer John Gallina said at a conference in June. He called it “a huge opportunity that we’ve missed in the past, that we now need to capitalize on.”
Anthem’s Medicare Advantage membership grew by 25% in the 12 months ending June 2019, far faster than any other category. Anthem is expanding to 77 new counties in 2020.
Seniors in traditional Medicare can go to any doctor or hospital that participates, as most do. Those who choose Medicare Advantage plans trade that freedom of choice for an insurance company’s more limited network. In exchange, they get extra benefits. Medicare Advantage policies often wrap in prescription-drug plans, vision and dental care. Many offer free gym memberships or fitness programs. They also cap members’ total out-of-pocket costs. In traditional Medicare, seniors have to buy policies known as Medicare supplement or Medigap plans to limit their out-of-pocket expenses.