medicare advantage premium analysis · benefits (out-of-pocket maximum, primary care physician...

MEDICARE ADVANTAGE PREMIUM ANALYSIS Gorman Health Group Issued: May 27, 2016

| May 2016

TABLE OF CONTENTS 2016 PREMIUM ANALYSIS ........................................................................................... 3

PREMIUM TRENDS ................................................................................................................................. 3

ZERO PREMIUM PLANS ......................................................................................................................... 4

GEOGRAPHY ........................................................................................................................................... 6

HEALTH PLANS ....................................................................................................................................... 7

OTHER BENEFITS TO CONSIDER ......................................................................................................... 8

Maximum Out-of-Pocket Limit .............................................................................................................. 8 PCP and Specialist Cost Sharing ....................................................................................................... 10

DISCUSSION ......................................................................................................................................... 13

APPENDIX 1 ................................................................................................................. 14

2016 AEP: MEDICARE MARKET ........................................................................................................... 14

APPENDIX 2 ................................................................................................................. 14

AVERAGE PLAN PREMIUM, BY STATE, 2015-2016 ....................................................................................... 14

| May 2016

2016 PREMIUM ANALYSIS

Each year Medicare Advantage Plans (MA) strive to be competitive from a premium, benefit and provider standpoint! This report examines MA premiums for 2016. Were Plans able to keep their premiums stable? What is the average MA plan premium? And, what percentage of MA enrollees are still in $0 plans? This analysis examines premium trends and premium variations by geography as well as impacts of some benefits (out-of-pocket maximum, primary care physician (PCP) cost-sharing, and specialist cost-sharing) for Medicare Advantage Prescription Drug Plans (MA-PDs) only. MA-PDs are the focus of this study because nearly 95% of MA enrollees are in MA-PDs. In addition, this analysis does not include Cost Plans. Now, let’s understand what we mean by premium. In addition to paying their Medicare Part B premium (typically automatically deducted from a beneficiary’s social security check), all MA enrollees are responsible for paying any premium set forth by their plan. Medicare Advantage Organizations (MAOs) consider many factors when pricing their Plan Benefit Package (PBP) premiums. Some important factors considered are medical trend, profitability goals, risk adjustment rate, reimbursement rate/benchmarks, as well as perceived and actual medical management of risk. In addition, MAOs price their PBPs based upon service area demographics (i.e., what can your target population afford) and competition (i.e., what is expected and desired by your population). All of these factors must be considered when pricing a PBP and should be taken into consideration when reading the analysis which follows. PREMIUM TRENDS

As seen in 2015, the average MA-PD premium, across all states, is about $53 in 2016 (Cost Plans not included). Several factors are considered when determining MA-PD premiums – product type, geography, beneficiary demographics, benefit design, risk adjustment, medical management, breadth of provider network, etc.

| May 2016

Figure 1: Average Monthly Premiums for MA-PDs, Total and by Product Type, 2015-2016

Note: Excludes SNPs, Group Plans, Cost Plans, PACE Plans. Includes only MA-PDs as well as plans with zero premiums. Source: CMS Landscape Files for 2015-2016 In 2016, average premiums range from $35 per month (Health Maintenance Organization (HMO)) to $82 per month (Private Fee-for-Service (PFFS)). HMO enrollees traditionally pay lower premiums than other plan types due to several factors, including less robust benefit coverage and provider networks with out-of-network limitations. It is important to keep in mind that several other factors like those listed above are considered when premiums are set. For example, a plan with good medical management will have less costly members, allowing the premiums to be lower and benefits to be more robust. Average monthly premiums rose slightly for HMO, HMO Point of Service (HMO-POS), and PFFS product types from 2015 to 2016. The average monthly premium for Preferred Provider Organizations (PPOs) remained the same at $80 from 2015 to 2016. ZERO PREMIUM PLANS

Zero premium plans are those plans which charge beneficiaries no additional monthly premium; this does not include the monthly Part B premium. In 2016, there are a total of 2,102 MA-PD PBPs (with over 11 enrollees; does not include SNPs) offered nationwide. 706 of these plans, or 34%, are zero premium plans. As seen in Figure 2 below, 34% of MA-PDs offered nationwide are zero premium plans with HMO zero premium plans being the product type holding the majority of zero premium plans at 85%.

$53

$34

$71 $80 $78

$53

$35

$79 $80 $82

Total HMO HMO-POS PPO PFFS

Average Monthly Premiums for MA-PDs by Product Type, 2015-2016

2015 2016

| May 2016

Figure 2: Percent of Zero Premium Plans Offered by Product Type, 2015-2016

Note: Excludes SNPs, Group Plans, Cost Plans, PACE Plans. Includes only zero premium MA-PDs. Source: CMS Landscape Files for 2015-2016

Figure 3: Enrollee Market Share in Zero Premium MA-PDs by Product Type, 2015-2016

Note: Excludes SNPs, Group Plans, Cost Plans, PACE Plans. Includes only zero premium MA-PDs. Source: CMS Landscape Files for 2015-2016

48%

59%

18%

39%

0.0%

34%

85%

8% 6% 0.4%

Total HMO Local PPO HMO-POS Regional PPO

Percent of Zero Premium Plan Offered by Product Type, 2015-2016

2015 2016

47%

37%

3% 4% 3%

46%

36%

4% 3% 3%

Total $0 Premium HMO $0 Local PPO $0 HMO-POS $0 Regional PPO $0

Enrollee Market Share in Zero Premium MA-PDs by Product Type, 2015-2016

2015 2016

| May 2016

In 2016, there are a total of nearly 14 million MA enrollees in MA-PDs. As seen in Figure 3, 46% (6,184,925 total enrollees) of these enrollees are in zero premium plans. The majority of the zero premium plan enrollees are in an HMO product type; 36% of the total enrollees are in an HMO zero premium plan. This consists of nearly 80% of all zero premium plans nationwide. It is important to consider Figure 3 in light of Figure 2, however. When looking at zero premium plans, there are simply more (85%) HMO zero premium plans offered. Hence, the larger market share when compared to other product types. GEOGRAPHY

Geography and market landscape impact premiums as well. Certain factors to consider are costs of care in a given county, penetration (by state and county compared to the national MA penetration), the quartile FFS benchmarks for a particular county, and reimbursement and bonus level by the county. Because many factors based upon geography are reflected in monthly plan premiums, comparing premiums across states is not typically beneficial. It is best to compare plans within certain markets to understand what is viable by not only a state level but a county level. This will give a clear picture of what plan type and premium are competitive and thriving. Average monthly premiums vary by state. For purposes of this study, we will look at states’ average premiums in light of the nationwide average premium of $53. In 2016, the average monthly MA-PD premium exceeds $70 in ten different states: Michigan ($96.09), Idaho ($95.91), Minnesota ($94.46), Hawaii ($88.92), Massachusetts ($88.28), North Dakota ($84), Pennsylvania ($80.96), Oregon ($77.96), Washington ($75.91), and Delaware ($71.38). The ten states with the lowest average monthly MA-PD premiums all fall below $42, with three states’ monthly MA-PD premium averaging less than $30. Figure 4 below shows the ten states with the lowest and the ten states with the highest average monthly MA-PD premiums (Cost Plans are not included). It is important to remember average monthly premium will vary within a state by county. For more detail on the average monthly premium by state, please see Appendix 2.

| May 2016

Figure 4: Average Monthly Premium for MA-PDs, by State, 2016

Note: Excludes SNPs, Group Plans, Cost Plans, PACE Plans. Only includes ten states with the lowest and ten states with the highest average monthly premiums. Source: CMS Landscape Files for 2015-2016 HEALTH PLANS

In the GHG analysis, “2016 AEP: Medicare Market” (Appendix 1), we noted that United Healthcare (21% market share), Humana (18% market share), Kaiser Foundation (8% market share), Aetna (7% market share), and Anthem, Inc. (3% market share), make up the top five MA firms in terms of overall market share. The study also shows that all of these firms offer a variety of product types. Based upon our analysis above, we know HMOs typically have the lowest premiums. Do the top five MA firms also have the most competitive pricing? Our analyses show us the top five firms do not necessarily have the lowest average monthly premiums. As seen in Figure 5, United Healthcare and Anthem have average monthly MA-PD premiums lower than the national average, but Kaiser, Aetna, and Humana do not. In fact, Humana’s average monthly MA-PD premiums are over $80. Upon closer scrutiny, we discovered it’s counter-intuitive to look at average monthly premiums at the parent organization level primarily because organizations are vastly different in size, product offerings, and location. To understand how organizations vary, it is useful and encouraged to look at competition at the market, by state or even county level.

$10.90 $23.97 $25.06

$30.19 $36.13 $37.17 $37.59 $37.89 $39.17

$41.00 $53

$71.38 $75.91

$77.96 $80.96

$84.00 $88.28 $88.92

$94.46 $95.91 $96.09

FloridaPuerto Rico

TexasCalifornia

IowaSouth Dakota

LouisianaSouth Carolina

MissouriWyoming

Nat AvgDelaware

WashingtonOregon

PennsylvaniaNorth Dakota

MassachusettsHawaii

MinnesotaIdaho

Michigan

Average Monthly Premium for MA-PDs, by State, 2016

| May 2016

Figure 5: Average Monthly Premium for MA-PDs, by Top 5 Organizations, 2016

Note: Excludes SNPs, Group Plans, Cost Plans, PACE Plans. Source: CMS Landscape Files for 2015-2016 OTHER BENEFITS TO CONSIDER

As previously mentioned, we can glean certain information about a PBP, and sometimes even a service area, when looking at monthly premiums. There are key benefits we will analyze in light of our premium findings above in order to identify any trends and beneficiary impact. One of the most important benefits from a beneficiary perspective, and those we will briefly touch on here, is the Maximum Out-of-Pocket (MOOP) costs. Other important benefits that should be analyzed are PCP copayments, specialist copayments, inpatient hospital copayments, and the standard 30-day generic drug (Rx) cost sharing. Maximum Out-of-Pocket Limit MAOs are required to limit their members’ out-of-pocket expenses for all Medicare-covered services and any additional benefits not covered in traditional FFS Medicare. As of 2011, the Centers for Medicare & Medicaid Services (CMS) began requiring MA plans to have an annual out-of-pocket limit no higher than $6,700. CMS also recommends a limit of $3,400 or lower for in-network services. In 2016, the average MOOP limit is $5,181 (Figure 6). In 2016, 55% (approximately 7.5 million) of Medicare beneficiaries are enrolled in MA-PD plans with limits of $5,000 or more.

$30.31

$45.91

$53

$54.03

$64.89

$82.08

$0.00 $10.00 $20.00 $30.00 $40.00 $50.00 $60.00 $70.00 $80.00 $90.00

United Healthcare

Anthem

Nat Avg

Kaiser Foundation

Aetna

Humana

Average Monthly Premium for MA-PDs, by Top 5 MA Organizations, 2016

| May 2016

Figure 6: MA-PD Average MOOP, 2015-2016

Note: Excludes SNPs, Group Plans, Cost Plans, PACE Plans. Source: CMS Landscape Files for 2015-2016 HMOs generally have lower out-of-pocket limits than other plan types. Figure 7 shows us across plan types, however, the majority of enrollees are paying above $5,000. Four percent of HMO enrollees are paying a $2,500 or less MOOP, while nearly half of HMO MA-PD enrollees are paying above $5,000. Nearly all PFFS enrollees (97%) and nearly two-thirds of PPO MA-PD enrollees are paying a MOOP over $5,000 compared to almost half of HMO enrollees (49%). HMO-POS enrollees pay the lowest MOOP across all plan types: 1% pay $2,500 or less, 41% pay $2,501-$3,400, 22% pay $3,401-$5,000, and only 35% pay $5,001- $6,700.

$5,014.78

$5,181.59

$4,900.00

$4,950.00

$5,000.00

$5,050.00

$5,100.00

$5,150.00

$5,200.00

2015 2016

Average MOOP for MA-PD Enrollees, 2015-2016

| May 2016

Figure 7: MA-PD Enrollees Average MOOP, by Plan Type, 2016

Note: Excludes SNPs, Group Plans, Cost Plans, PACE Plans. Source: CMS Landscape Files for 2015-2016 PCP and Specialist Cost Sharing PCP and specialist visits are among some of the most important benefits from a beneficiary and MAO perspective. One primary goal of every MAO is to ensure their members are healthy and receiving appropriate ongoing care and, of course, to avoid hospital admissions, which are costly. MAOs can do this by incentivizing PCP and specialist (when necessary) visits and by keeping cost sharing low. On the other hand, beneficiaries are more willing to see their doctor on a regular basis if costs are low. In 2016, the average in-network PCP copayment is $9.23, while the specialist copayment averages just over $34 (Figure 8).

4% 1% 0.20%

23% 41%

6%

25%

22%

3%

29%

49% 35%

97%

69%

0%

20%

40%

60%

80%

100%

120%

HMO HMO-POS PFFS PPO

MA-PD Enrollees Average MOOP, by Plan Type, 2016

$5,001-$6,700

$3,401-$5,000

$2,501-$3,400

$2,500 or less

| May 2016

Figure 8: MA-PD Average PCP & Specialist Cost Sharing, 2015-2016

As with the MOOP, HMOs generally have lower PCP and specialist cost sharing than other plan types. Figure 9 shows us PCP cost sharing across plan types. HMO and HMO-POS enrollees are paying the lowest cost sharing for PCP visits; 37% of HMO-POS enrollees are paying nothing for PCP visits, and 35% of the HMO enrollees are paying nothing. In the PFFS and PPO plan types, the majority of enrollees are paying between $11 and $15 per PCP visit; 45% of PPO enrollees and 35% of PFFS enrollees. Figure 10 shows us specialist visit cost sharing across plan types. Here we see a large portion of enrollees are paying between $41 and $51 for specialist visits across plan types; 28% of HMO enrollees, 30% of HMO-POS enrollees, 87% of PFFS enrollees, and 63% of PPO enrollees. Notably, we see that among the HMO and HMO-POS plan types, there is a broader variety of specialist visit cost sharing than seen in the PFFS and PPO plan types. For example, for the specialist office visit in the HMO plan type, 10% of enrollees are paying $0, 4% are paying $1-$10, 11% are paying $11-$20, 15% are paying $21-$30, 30% are paying $31-$40, 28% are paying $41-$50, and 1% are paying 20% cost sharing.

$10.42 $9.23

$34.18 $34.57

$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00

$40.00

2015 2016

MA-PD Average PCP & Specialist Cost Sharing, 2015-2016

PCP Cost Sharing

Specialist Cost Sharing

| May 2016

Figure 9: MA-PD Enrollees Average PCP Cost Sharing, by Plan Type, 2016

Figure 10: MA-PD Enrollees Average Specialist Cost Sharing, by Plan Type, 2016

35% 37%

2% 3%

18% 6%

9%

23%

10%

7%

23%

13%

23%

35%

45%

6% 10%

27%

12% 3%

10% 28% 5%

0%

20%

40%

60%

80%

100%

120%


MA-PD Average PCP Cost Sharing, by Plan Type, 2016

20%

$31+

$26-$30

$21-$25

$16-$20

$11-$15

$6-$10

$1-$5

$0.00

10% 2% 0.2%

4% 10%

0.04%

11% 10% 1%

15% 14%

2% 9%

30% 32%

10%

27%

28% 30%

87%

63%

0%

20%

40%

60%

80%

100%

120%


MA-PD Enrollees Average Specialist Cost Sharing, by Plan Type, 2016

20%

$41-$50

$31-$40

$21-$30

$11-$20

$1-$10

$0

| May 2016

DISCUSSION

While MA premiums have remained relatively flat, we do see a slight rise in out-of-pocket limits. Further analysis needs to be done to look at cost sharing of other important benefits in light of premiums and geography. For example, in-patient hospital cost sharing should be analyzed as it is an important benefit both beneficiaries and MAOs. In-patient hospital benefits vary vastly across plan types as the benefit spans and cost can be quite broad. For example, some plans offer a flat in-patient cost per stay while other plans offer a per day benefit for the first 5 days. It is not as straight forward in comparing plans based upon this benefit. Average monthly premiums by state range from $10 to $96, with the national average at $53. As previously discussed, premium and cost sharing at a national level is insightful, but to truly understand trend and markets, it is important to look at demographics, MA penetration, and benefit comparisons at a service area level (e.g., by county, statewide or countywide).

| May 2016

APPENDIX 1

2016 AEP: MEDICARE MARKET

Appendix 1 2016 AEP Medicare Market. APPENDIX 2

AVERAGE PLAN PREMIUM, BY STATE, 2015-2016

State 2015

Average Plan Premium

2016 Average

Plan Premium Change

2015 to 2016 %

Change

AL $70.59 $55.07 -$15.52 -22.0% AR $37.38 $44.49 $7.12 19.0% AZ $39.18 $44.05 $4.87 12.4% CA $35.65 $30.19 -$5.46 -15.3% CO $61.75 $62.10 $0.35 0.6% CT $61.60 $67.38 $5.78 9.4% DC $48.00 $59.67 $11.67 24.3% DE $100.67 $71.38 -$29.29 -29.1% FL $9.97 $10.90 $0.93 9.4% GA $33.94 $41.55 $7.61 22.4% HI $70.77 $88.92 $18.15 25.6% IA $32.33 $36.13 $3.80 11.7% ID $76.24 $95.91 $19.67 25.8% IL $45.55 $47.07 $1.52 3.3% IN $45.89 $42.10 -$3.78 -8.2% KS $53.42 $49.46 -$3.96 -7.4% KY $49.94 $59.24 $9.31 18.6% LA $36.27 $37.59 $1.31 3.6% MA $88.97 $88.28 -$0.69 -0.8% MD $58.13 $57.92 -$0.21 -0.4% ME $55.20 $50.48 -$4.72 -8.5% MI $94.61 $96.09 $1.47 1.6% MN $120.49 $94.46 -$26.02 -21.6% MO $41.24 $39.17 -$2.07 -5.0% MS $48.71 $46.29 -$2.43 -5.0% MT $56.32 $53.96 -$2.36 -4.2% NC $41.86 $45.22 $3.36 8.0% ND $77.00 $84.00 $7.00 9.1% NE $38.79 $42.64 $3.86 9.9%

| May 2016

State 2015

Average Plan Premium

2016 Average

Plan Premium Change

2015 to 2016 %

Change

NH $50.56 $53.29 $2.74 5.4% NJ $73.59 $68.70 -$4.89 -6.6% NM $44.70 $48.97 $4.27 9.6% NV $62.54 $47.85 -$14.70 -23.5% NY $64.23 $69.29 $5.06 7.9% OH $46.82 $56.71 $9.89 21.1% OK $45.75 $47.87 $2.12 4.6% OR $80.13 $77.96 -$2.16 -2.7% PA $89.23 $80.96 -$8.27 -9.3% PR $10.02 $23.97 $13.95 139.2% RI $68.22 $69.78 $1.56 2.3% SC $29.89 $37.89 $8.00 26.8% SD $40.20 $37.17 -$3.03 -7.5% TN $47.13 $49.42 $2.28 4.8% TX $27.34 $25.06 -$2.28 -8.3% UT $39.15 $42.00 $2.85 7.3% VA $51.28 $53.12 $1.84 3.6% VT $59.82 $63.27 $3.45 5.8% WA $85.19 $75.91 -$9.27 -10.9% WI $72.86 $69.92 -$2.93 -4.0% WV $77.06 $68.50 -$8.56 -11.1% WY $21.50 $41.00 $19.50 90.7%

Grand Total $53.26 $53.62 $0.36 0.7%

2016 AEP: MEDICARE MARKET Gorman Health Group, LLC (GHG) Issued: March 23, 2016

| March 2016

TABLE OF CONTENTS

OVERALL TRENDS IN ENROLLMENT ......................................................................... 4

NATIONWIDE ENROLLMENT ........................................................................................................................... 4

2015 AEP VS. 2016 AEP .............................................................................................................................. 5

ENROLLMENT TREND BY PLAN TYPE .............................................................................................................. 6

GROUP ENROLLMENT ................................................................................................................................... 8

MEDICARE SUPPLEMENT ENROLLMENT .......................................................................................................... 9

MEDICARE ADVANTAGE ENROLLMENT GROWTH BY STATE ............................................................................. 10

MEDICARE ADVANTAGE PENETRATION BY STATE .......................................................................................... 10

MEDICARE ADVANTAGE PARENT ORGANIZATIONS ............................................. 14

ENROLLMENT BY PARENT ORGANIZATION .................................................................................................... 14

DISCUSSION ................................................................................................................ 17

APPENDIX 1: TABLE A1 ............................................................................................. 18

APPENDIX 2: TABLE A2 ............................................................................................. 20

| March 2016

The number and market share of Medicare beneficiaries enrolling in Medicare Advantage (MA) plans has continued to increase. Currently, there are nearly 18 million Medicare beneficiaries enrolled in MA health plans across the country. This includes all individual and group plan enrollment. Gorman Health Group, LLC (GHG) has run an analysis of the Annual Election Period (AEP) results for the 2016 AEP. The goal of this AEP analysis is to spotlight the current MA national enrollment as well as help MA health plans and industry professionals understand the MA market. The analysis of the national enrollment trend provides the industry with information on which states, plans, and plan types are experiencing the most growth or loss in enrollment. The analysis reviews national and state-level enrollment trends as of February 2016 and examines variation in enrollment by plan type and organization. Key findings include:

MA enrollment has continued to grow and increased in virtually all states in the 2016 AEP.

MA enrollment is still highly concentrated among large organizations.

There has been some growth in most plan types.

Most enrollees continue to be in Health Maintenance Organizations (HMOs). (Enrollees in HMOs typically pay lower premiums and have lower limits on out-of-pocket expenses.)

| March 2016

OVERALL TRENDS IN ENROLLMENT

NATIONWIDE ENROLLMENT

There are nearly 18 million beneficiaries – 32% of the Medicare population – enrolled in MA plans as of February 2016 (Figure 1 and Figure 2). Total MA enrollment grew by just over 1 million between December 2014 and December 2015. Although enrollment continues to increase, we do see, since 2012, the overall growth percentage has waned. For example, from 2012 to 2013 and 2013 to 2014, we saw an overall increase in MA enrollment of over 9% and 10%, respectively. From December 2014 to December 2015, we saw an overall increase in enrollment of just under 7%. Figure 1 Total Medicare Private Health Plan Enrollment, 2012-Feb 2016

Note: Includes all plan types (individual and group).

13,615,561

14,886,709

16,387,214 17,518,034 17,963,279

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

18,000,000

20,000,000

Total Medicare Private Health Plan Enrollment

Total Medicare Private Health Plan Enrollment, 2012-Feb 2016

12/1/2012 12/1/2013 12/1/2014 12/1/2015 2/1/2016

| March 2016

Figure 2 Total Medicare Private Health Plan Enrollment, 2012-Feb 2016

2015 AEP VS. 2016 AEP

Table 1 Total Medicare Private Health Plan Enrollment, 2015 AEP

2015 AEP 12/1/2014 2/1/2015

Total Enrollment 16,387,214 17,036,233

Table 2 Total Medicare Private Health Plan Enrollment, 2016 AEP

2016 AEP 12/1/2015 2/1/2016

Total Enrollment 17,518,034 17,963,279

The 2016 AEP saw an overall growth of 445,245 beneficiaries enrolled in MA health plans, while the 2015 AEP saw an overall growth of nearly 650,000 beneficiaries enrolled in MA health plans. 2015 AEP saw an overall enrollment increase of 4%. The 2016 AEP only saw a 2.5% increase. It is important to take into consideration the Medicare-Medicaid Plan (MMP) product was new to market in the 2015 AEP and may account for the larger raw numbers of enrollees than we saw in 2016. Although the growth in the 2015 AEP was larger than this recent AEP, we are still seeing a rise in MA enrollment overall.

26%28%

30% 31% 32%

0%

5%

10%

15%

20%

25%

30%

35%

2012 2013 2014 2015 2/1/2016

Medicare Private Health Plan National Penetration

2012-Feb 2016

% of Medicare Beneficiaries

| March 2016

ENROLLMENT TREND BY PLAN TYPE

Figure 3 shows that of total MA eligibles, 67% are enrolled in traditional Fee-for-Service (FFS) Medicare, while 33% are enrolled in a private MA plan as of February 2016. Please note that of the 67% enrolled in traditional (original) Medicare, some may also be enrolled in a stand-alone Prescription Drug Plan (PDP).

Figure 3 Distribution of Enrollment Traditional FFS vs Medicare Advantage, Feb 2016

As seen in Figure 4, 38% of MA enrollees are enrolled in HMOs as of February 2016. Almost half of enrollees are in either a Preferred Provider Organization (PPO) (27%), 1876 Cost plan (9%), or an HMO Special Needs Plan (HMO-SNP) (9%). Less than 1% of enrollees are in other plan types, including Regional PPOs, HMO-POS, MMPs, Regional PPO SNPs, and Private Fee-for-Service (PFFS) plans. Other plans include PPO SNPs, Program of All-inclusive Care for the Elderly (PACE) plans, HMO-POS SNPs, and Medical Savings Account (MSA) plans.

Traditional FFS67%

Medicare Private Health Plans

33%

Distribution of Enrollment in Traditional FFS vs Medicare Private Health Plans, Feb 2016

Traditional FFS Medicare Advantage

| March 2016

Figure 4 Distribution of Enrollment in Private Health Plans, by Plan Type, Feb 2016

In absolute numbers, enrollment in HMOs grew more than any other plan type in the 2016 AEP. Enrollment in HMOs increased by over 360,000 individuals (Figure 5). Figure 5 Total Medicare Advantage Enrollment, by Plan Type, 2012-Feb 2016

Note: “Other” includes MSAs and National PACE plans.

HMO38%

PPO27%

Cost9%

HMO-SNP9%

R-PPO5%

HMO-POS5%

HMO/HMOPOS2%

MMP2%

R-PPO-SNP 1%

PFFS 1%

Other 0.8%

Low Enrollment Plan Types 1%

Distribution of Enrollment in Medicare Private Health Plans, by Plan Type, Feb 2016

5,200,109 5,622,005 6,099,889 6,539,777 6,903,199

3,596,2994,134,343

4,785,239 5,084,692 4,792,6591,243,8591,283,278

1,381,6001,517,263 1,569,039

1,299,0841,423,412

1,570,4371,633,537 1,522,821

751,768874,517

947,020965,769 982,042

1,524,4421,549,154

1,603,0291,776,996 2,193,519

12/1/2012 12/1/2013 12/1/2014 12/1/2015 2/1/2016

Total Medicare Private Health Plans Enrollment,

by Plan Type, 2012-Feb 2016

Other

Regional PPO

HMO SNP

Cost

PPO

HMO

| March 2016

Although enrollment in PPOs decreased this past AEP, the local PPO does make up the second largest segment of MA enrollees. In contrast, enrollment in regional PPOs remained relatively flat with an increase of just over 16,000. The national trend shows to be similar at the state level (Table A1 - Appendix). A key difference between an HMO and a PPO is the PPO allows members more flexibility to see providers of their choice who may be outside of the plan’s provider network. Local PPOs, like HMOs, are open to beneficiaries who live in specified counties. Regional PPOs can only be offered in one of 26 MA regions established by CMS. Although HMOs are dominant in the market when looking at sheer numbers, we are seeing there is growing interest by beneficiaries to enroll in the PPO product type. GROUP ENROLLMENT

The majority of Medicare beneficiaries who enroll in an MA plan enroll as individuals. However, there is a low number of beneficiaries who are enrolled through group plans. As of February 2016, nearly 3.2 million MA enrollees are in a group plan (Figure 5). Figure 6 – Medicare Private Health Plans Enrollment in Individual and Group Markets, 2012-Feb 2016

Although enrollment in group plans has grown from nearly 2.4 million in 2012 to over 3 million in February 2016, the growth rate has basically flattened. We are seeing growth more in the individual market.

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

Total IndividualEnrollees

Total GroupEnrollees

11,239,785

2,375,776

12,289,107

2,597,602

13,382,310

3,004,904

14,349,709

3,168,325

14,817,119

3,146,160

Medicare Private Health Plans Enrollment in Individual and Group Markets, 2012-Feb 2016

12/1/2012

12/1/2013

12/1/2014

12/1/2015

2/1/2016

| March 2016

As seen in Figure 7, employers appear to mostly offer local PPOs over HMOs, which contrasts with the individual market. Employer group PPO enrollment has shown steady increase since 2012 to over 2 million enrollees. On the other hand, employer group HMOs are just over half a million enrollees as of February 2016. Figure 7 – Medicare Private Health Plans Enrollment in Individual and Group Markets, by Plan Type, 2012-Feb 2016

MEDICARE SUPPLEMENT ENROLLMENT

An increasing number of beneficiaries are choosing Medicare Supplement Plans after periods of enrollment in Medicare Advantage Plans. This is partially due to fluctuating year over year high out of pocket costs with Medicare Advantage Plans. Furthermore, over the past three years, MedSupp plans are becoming more competitive. It is important to note Medicare Supplement enrollment has shown consistent growth over the past three years with total lives covered reaching over 11 million in 2014, increasing by nearly 500,000 enrollees from 2013 to 2014. Medicare Supplemental enrollment saw an increase of 4.5% in 2015.

871k 899k 989k 1.1m 1.2m372k 384k 392k 388k 388k

4.7m 5.1m5.6m

6m

6.4m

474k 496k 495k 511k 515k

1.3m1.4m

1.6m1.6m

1.5m

680k741k

709k732k

784k

2.2m

2.6m

2.8m3m

2.7m

1.4m 1.6m 2m 2.1m 2.1m

Medicare Private Health Plans Enrollment in the Individual and Group Markets, by Plan Type, 2012-Feb2016

Regional PPO SNP

Regional PPO

PPO SNP

PFFS

PACE

MSA

MMP

PPO

HMO-POS SNP

HMO-POS

HMO/HMOPOS

HMO SNP

HMO

Cost

Individual

Group

| March 2016

Figure 8 – Medicare Supplement Enrollment, 2012-2015

MEDICARE ADVANTAGE ENROLLMENT GROWTH BY STATE

As seen in Table A2 (found in the appendix), enrollment increased in virtually all states in the 2016 AEP. Idaho, New York, and Ohio are the three states which show a decline in enrollment. Notably, Ohio saw a total MA enrollment loss of over 70,000 enrollees. California (increase of 59,676), Texas (increase of 56,862), Florida (increase of 42,446), Illinois (increase of 28,764), and Georgia (increase of 24,693) saw the most growth in total MA (individual and group) enrollment this past AEP. MEDICARE ADVANTAGE PENETRATION BY STATE

Table 3: Medicare Advantage Enrollment and Penetration Rate, by State, Feb 2016

State Current Eligibles 2/1/2016

MA Enrolled 2/1/2016

State MA Penetration

2/1/2016

PDP Enrolled 2/1/2016

State PDP Penetration

2/1/2016

Total U.S. 54,845,951 17,633,663 32% 24,543,553 45%

Alabama 975,599 260,903 27% 456,672 47%

Alaska 83,091 329 0.4% 32,978 40%

American Samoa 4,047 78 2% 159 4%

Arizona 1,145,485 445,010 39% 406,048 35%

Arkansas 599,609 126,015 21% 305,942 51%

California 5,709,249 2,380,167 42% 2,126,018 37%

Colorado 797,702 298,384 37% 295,285 37%

Connecticut 634,789 166,075 26% 327,775 52%

10,181,401

10,640,986

11,208,332

11,666,204

9,000,000

9,500,000

10,000,000

10,500,000

11,000,000

11,500,000

12,000,000

2012 2013 2014 2015

Medicare Supplement Enrollment, 2012-2015

| March 2016





2/1/2016



2/1/2016

Delaware 182,524 17,148 9% 120,077 66%

Florida 4,059,675 1,677,852 41% 1,452,369 36%

Georgia 1,541,404 514,105 33% 620,243 40%

Guam 15,195 28 0.2% 3,109 20%

Hawaii 247,766 113,875 46% 65,176 26%

Idaho 285,887 92,992 33% 111,372 39%

Illinois 2,084,881 466,541 22% 1,077,496 52%

Indiana 1,161,028 284,192 24% 619,211 53%

Iowa 578,105 101,664 18% 369,631 64%

Kansas 492,014 72,001 15% 286,045 58%

Kentucky 869,305 238,381 27% 463,094 53%

Louisiana 801,843 252,595 32% 343,807 43%

Maine 309,143 75,456 24% 151,892 49%

Maryland 941,535 90,694 10% 491,806 52%

Massachusetts 1,228,535 260,015 21% 657,224 54%

Michigan 1,915,128 660,106 34% 1,091,640 57%

Minnesota 921,903 514,918 56% 407,431 44%

Mississippi 564,499 87,823 16% 321,533 57%

Missouri 1,144,713 343,721 30% 538,086 47%

Montana 203,991 40,335 20% 93,581 46%

Nebraska 316,705 40,247 13% 193,520 61%

Nevada 458,340 159,287 35% 157,637 34%

New Hampshire 267,225 21,336 8% 156,108 58%

New Jersey 1,506,195 248,622 17% 897,600 60%

New Mexico 377,224 121,821 32% 149,371 40%

New York 3,369,226 1,253,924 37% 1,428,754 42%

North Carolina 1,787,661 552,120 31% 804,835 45%

North Dakota 119,027 22,274 19% 80,597 68%

Northern Mariana Islands 2,115 0 0% 0 0%

Ohio 2,170,909 818,649 38% 1,014,677 47%

Oklahoma 683,591 120,308 18% 350,342 51%

Oregon 762,547 342,725 45% 239,461 31%

Pending State Designation 15,349 0 0% 0 0%

Pennsylvania 2,549,356 1,033,120 41% 1,062,317 42%

Puerto Rico 0 0 0% 0 0%

Rhode Island 204,625 73,319 36% 84,542 41%

South Carolina 952,938 228,785 24% 466,300 49%

South Dakota 156,738 32,710 21% 97,989 63%

Tennessee 1,244,934 447,017 36% 508,545 41%

| March 2016





2/1/2016



2/1/2016

Texas 3,683,218 1,237,777 34% 1,576,751 43%

Utah 349,696 122,530 35% 123,864 35%

Vermont 132,918 10,122 8% 88,600 67%

Virgin Islands 0 0 0% 0 0%

Virginia 1,366,422 255,066 19% 638,012 47%

Washington 1,205,282 363,857 30% 450,399 37%

Washington D.C. 88,998 12,408 14% 40,390 45%

West Virginia 418,482 115,936 28% 201,824 48%

Wisconsin 1,061,016 415,012 39% 436,982 41%

Wyoming 96,569 3,288 3% 58,436 61%

Total Penetration 54,845,951 17,633,663 32% 24,543,553 45%

As in the 2015 AEP, the five states with the most enrollment in the 2016 AEP are California, Florida, New York, Texas, and Pennsylvania. This, again, comes as no surprise as these are the leading states in current overall MA eligibles as of February 2016. This held true for the 2015 AEP as well. The map below shows the MA and stand-alone PDP penetration by state. The color codes reflect the range in which the state’s current MA penetration lies.

| March 2016

Figure 8 – Share of Medicare Beneficiaries Enrolled in Medicare Advantage Plans, by State, Feb 2016

While MA enrollment is increasing in many states, as of February 2016, less than 10% of beneficiaries are enrolled in MA plans in 6 states (WY, AK, NH, VT, DE, MD). In 23 states, more than 30% of beneficiaries are enrolled in MA plans as of February 2016. Additionally, in 5 states (OR, CA, MN, PA, FL), more than 40% of beneficiaries are enrolled in MA plans. It is important to note, within states, MA penetration varies across counties.

Medicare Advantage Penetration, by State, Feb 2016

National Average, Feb 2016 = 32%

| March 2016

MEDICARE ADVANTAGE PARENT ORGANIZATIONS

ENROLLMENT BY PARENT ORGANIZATION

As we have seen in prior years, MA enrollment is highly concentrated among a small number of large, national organizations. Figure 9 – Medicare Advantage Enrollment & Market Share, by Parent Organization, Feb 2016

The figures above show us UnitedHealth Group currently leads the market at 21% (total growth of 305,720 total enrollees during the 2016 AEP) market share. UnitedHealth Group shows the most overall growth by parent organization this past AEP. This includes group and individual enrollment. Humana is a close second at 18% market share. Although Humana holds 18% of the current MA market, they experienced a major loss in enrollment this past AEP of over 73,400 members. Kaiser currently holds 8% of the overall MA market. Aetna (7% market share) and Cigna (3% market share), also major players as seen in the figure above, come in second and third place, respectively, for overall growth. Aetna shows growth of over 75,000 members, while Cigna grew by over 57,000 members. Just as in the 2015 AEP, the five parent organizations with highest market share in the 2016 AEP are:

UnitedHealth Group

Humana Group

Kaiser Foundation Group

UNITEDHEALTH GRP21%

HUMANA GRP18%

KAISER FOUNDATION

GRP8%

AETNA GRP7%

ANTHEM INC GRP

3%

CIGNA HLTH GRP3%

BCBS OF MI GRP2%

HIGHMARK GRP2%

All Others36%

Medicare Private Health Plans Enrollment, by Parent Organization, Feb 2016

UNITEDHEALTH GRP

HUMANA GRP

KAISER FOUNDATION GRP

AETNA GRP

ANTHEM INC GRP

CIGNA HLTH GRP

BCBS OF MI GRP

HIGHMARK GRP

All Others

| March 2016

Aetna Group

Anthem Inc Group

Figure 10 – Medicare Private Health Plans Enrollment, by Parent Organization, 2015 AEP vs 2016 AEP

Let’s look at how these top five MA parent organizations position themselves in the market, more specifically, what type of plans are being offered by these organizations. For the purposes of this analysis, we will look at the total enrollment by the already-identified top product types for each of the five leading parent organizations. Recall from earlier, the top five performing product types are HMO, PPO, Cost, HMO-SNP, and Regional PPO. The figure below represents the total enrollment in these products by leading parent organization.

3,196,4393,425,618 3,477,372 3,783,092

2,895,250 3,134,354 3,218,303 3,144,825

1,260,861 1,281,188 1,337,695 1,350,563

1,131,7541,227,607 1,254,630

1,330,285

683,929573,261 595,387 561,478

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

Total Enrollees12/1/2014




UnitedHealth Grp

Humana Grp

Kaiser Foundation Grp

Aetna Grp

Anthem Inc Grp

| March 2016

Figure 11 – Medicare Private Health Plans Enrollment, by Product Type, by Parent Organization

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

UnitedHealth Humana KaiserFoundation

Aetna Anthem Inc

Regional PPO

HMO SNP

Cost

PPO

HMO

| March 2016

DISCUSSION

Although the 2016 AEP did not show as much enrollment growth as 2015, enrollment in MA plans continues to grow nationally and by state. As in prior years, enrollment in the MA market is highly concentrated among a small number of organizations and within the HMO product type. Enrollment is even more highly concentrated in some states, and trends are as expected by total number of current MA eligibles. However, we are left with an important question: What does this mean for beneficiaries? In order to gain further understanding of enrollment trends, factors that may be impacting shifts in enrollment should be analyzed:

Premiums (average premium trends by product and state)

Cost-sharing structure (out-of-pocket costs)

Quality Star Ratings

Access to providers and hospitals

Part D coverage

| March 2016

APPENDIX 1: TABLE A1

Table A1: Medicare Advantage Enrollment by State and Plan Type, Feb 2016

State Total

Distribution of Enrollment, by State and Plan Type

% HMO

% PPO

% Cost

% HMO SNP

% Regional

PPO

% Other

Total U.S.

17,963,280 38% 27% 9% 8% 5% 12%

AK 76 0% 0.0004% 0% 0% 0% 0%

AL 257,177 1% 0.5% 0% 0.3% 0.1% 0.01%

AR 121,965 0.3% 0.1% 0% 0.0% 0.1% 0.2%

AS 12 0% 0.0001% 0% 0% 0% 0%

AZ 441,084 2% 0.1% 0.004% 0.5% 0.04% 0.1%

CA 2,367,449 6% 1% 5% 1% 0% 1%

CO 292,802 1% 0.1% 1% 0.1% 0% 0.1%

CT 165,030 1% 0.1% 0% 0.02% 0.02% 0.1%

DC 12,288 0.01% 0.005% 0.03% 0.00% 0% 0.02%

DE 16,794 0.04% 0.04% 0% 0.01% 0% 0.004%

FL 1,665,457 4% 2% 0.0004% 1% 2% 1%

GA 506,862 1% 1% 0.1% 0.2% 0.3% 0.5%

HI 113,232 0.1% 0.3% 0.09% 0.04% 0% 0.1%

IA 98,761 0.2% 0.3% 0.05% 0% 0% 0.01%

ID 90,198 0.2% 0.2% 0% 0.01% 0% 0.1%

IL 455,342 1% 1% 0.01% 0.06% 0.05% 0.5%

IN 279,006 0.3% 1% 0% 0.01% 0.3% 0.1%

KS 67,810 0.2% 0.2% 0% 0% 0.01% 0.03%

KY 229,514 0.2% 1% 0% 0.04% 0.3% 0.1%

LA 249,520 1% 0.1% 0% 0.2% 0.1% 0.1%

MA 258,333 1% 0.4% 0% 0.2% 0.06% 0.1%

MD 88,826 0.1% 0.1% 0.2% 0.1% 0% 0.02%

ME 74,676 0.1% 0.1% 0% 0.01% 0% 0.2%

MI 654,707 0.05% 3% 0% 0.1% 0.1% 1%

MN 509,264 0.004% 0.5% 2% 0.2% 0% 0.5%

MO 336,419 1% 0.4% 0% 0.03% 0.1% 0.3%

MS 85,124 0.2% 0.1% 0% 0.1% 0.1% 0.01%

MT 39,027 0.01% 0.2% 0% 0.0002% 0% 0.01%

NC 545,724 1% 1% 0% 0.1% 0.2% 0.1%

ND 21,405 0% 0.01% 0.1% 0% 0% 0.001%

NE 37,199 0.1% 0.05% 0.0001% 0% 0% 0.04%

NH 20,697 0.05% 0.03% 0% 0.0002% 0% 0.03%

NJ 245,706 1% 0.3% 0% 0.05% 0.005% 0.1%

NM 119,721 0.4% 0.2% 0% 0.02% 0% 0.1%

NV 157,221 1% 0.1% 0.004% 0.05% 0% 0.0002%

NY 1,242,779 3% 2% 0.001% 1% 1% 1%

OH 809,363 1% 2% 0.1% 0.1% 0.1% 1%

OK 116,854 0.4% 0.2% 0% 0.001% 0.02% 0.03%

| March 2016

Table A1: Medicare Advantage Enrollment by State and Plan Type, Feb 2016

State Total

Distribution of Enrollment, by State and Plan Type

% HMO

% PPO

% Cost

% HMO SNP

% Regional

PPO

% Other

OR 338,795 1% 1% 0.2% 0.1% 0% 0.2%

PA 1,022,209 3% 2% 0% 1% 0.03% 0.1%

PR 562,838 0.3% 0.2% 0% 1% 0% 1%

RI 73,018 0.2% 0.01% 0% 0.0001% 0.01% 0.2%

SC 225,586 0.4% 0.2% 0% 0.02% 0.3% 0.4%

SD 30,983 0.0004% 0.04% 0.1% 0% 0% 0.002%

TN 440,309 1% 1% 0% 0.4% 0.1% 0.1%

TX 1,223,279 3% 2% 0.2% 1% 1% 1%

UT 120,044 1% 0.1% 0% 0.04% 0% 0%

VA 246,777 0.4% 0.3% 0.1% 0.02% 0.2% 0.3%

VT 9,671 0.003% 0.0% 0% 0% 0.03% 0.01%

WA 359,805 1% 0.3% 0.1% 0.1% 0% 0.1%

WI 410,277 1% 1% 0.3% 0.1% 0.1% 0.4%

WV 103,984 0.02% 0.5% 0% 0% 0.03% 0.03%

WY 2,085 0.001% 0.002% 0% 0% 0% 0.01%

Unknown State

195 0.0001% 0.0004% 0.0005% 0% 0% 0.0001%

| March 2016

APPENDIX 2: TABLE A2

Table A2: Medicare Advantage Enrollment by State, 2012-Feb 2016

State 12/1/2012 12/1/2013 12/1/2014 12/1/2015 1/1/2016 AEP 2016

Growth

AK 18 25 21 63 76 13

AL 191,842 209,883 226,328 244,772 257,177 12,405

AR 89,273 102,197 110,275 116,610 121,965 5,355

AS

12 12

AZ 372,368 391,234 411,215 432,621 441,084 8,463

CA 1,880,018 2,014,409 2,204,032 2,307,773 2,367,449 59,676

CO 234,539 252,586 271,578 287,955 292,802 4,847

CT 132,609 144,401 151,352 162,418 165,030 2,612

DC 8,456 9,087 10,429 11,850 12,288 438

DE 8,214 11,609 12,926 14,271 16,794 2,523

FL 1,245,153 1,370,986 1,501,330 1,623,011 1,665,457 42,446

GA 323,880 378,630 429,919 482,169 506,862 24,693

HI 100,417 106,841 110,899 112,989 113,232 243

IA 72,640 75,382 78,145 81,852 98,761 16,909

ID 73,482 77,981 84,358 90,298 90,198 -100

IL 191,989 212,954 386,096 426,548 455,342 28,794

IN 203,800 230,994 249,189 269,270 279,006 9,736

KS 51,266 56,137 59,758 62,218 67,810 5,592

KY 132,227 186,817 203,496 220,040 229,514 9,474

LA 185,228 199,714 220,394 240,478 249,520 9,042

MA 204,684 218,965 243,988 250,426 258,333 7,907

MD 71,624 74,485 76,905 78,804 88,826 10,022

ME 45,953 53,575 61,949 71,647 74,676 3,029

MI 455,638 502,685 570,108 640,363 654,707 14,344

MN 395,680 432,364 465,091 495,979 509,264 13,285

MO 241,910 265,498 291,046 318,270 336,419 18,149

MS 57,248 65,425 71,811 80,341 85,124 4,783

MT 27,525 28,513 32,456 36,021 39,027 3,006

NC 305,258 341,327 489,367 526,160 545,724 19,564

ND 12,866 14,736 16,630 19,412 21,405 1,993

NE 33,394 33,466 33,770 34,998 37,199 2,201

NH 11,039 13,827 16,699 18,073 20,697 2,624

NJ 211,623 232,528 223,974 228,477 245,706 17,229

NM 92,331 102,238 111,165 117,929 119,721 1,792

NV 123,241 129,102 139,301 150,014 157,221 7,207

NY 1,033,851 1,108,409 1,191,849 1,245,688 1,242,779 -2,909

OH 727,096 771,189 817,461 879,848 809,363 -70,485

OK 97,519 102,478 106,214 111,402 116,854 5,452

OR 276,591 294,671 314,554 331,894 338,795 6,901

PA 914,093 953,094 982,666 1,006,554 1,022,209 15,655

PR 498,185 525,020 543,568 560,249 562,838 2,589

| March 2016

Table A2: Medicare Advantage Enrollment by State, 2012-Feb 2016

State 12/1/2012 12/1/2013 12/1/2014 12/1/2015 1/1/2016 AEP 2016

Growth

RI 67,078 68,806 69,266 71,624 73,018 1,394

SC 151,260 179,149 200,948 217,279 225,586 8,307

SD 17,143 20,183 23,943 28,265 30,983 2,718

TN 312,555 352,995 389,382 424,085 440,309 16,224

TX 743,346 925,334 1,036,336 1,166,417 1,223,279 56,862

UT 107,092 105,691 110,313 116,480 120,044 3,564

VA 178,317 186,324 224,450 237,106 246,777 9,671

VT 7,513 8,504 8,613 9,198 9,671 473

WA 301,173 319,613 341,610 358,559 359,805 1,246

WI 312,434 336,133 363,537 398,207 410,277 12,070

WV 79,436 86,217 94,403 98,770 103,984 5,214

WY 3,330 2,153 1,968 2,078 2,085 7

Unknown State 116 145 133 211 195 -16

Grand Total 13,615,561 14,886,709 16,387,214 17,518,034 17,963,279 445,245

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