More than 300,000 Minnesotans will be changing Medicare health plans next year, state officials said, when a federal law eliminates certain health insurance options in the Twin Cities and across much of the state.
For more than a year, insurers have been sizing up the coming shift with Medicare Cost plans, a specific type of coverage that's distinct from Medicare Advantage plans that are more common outside Minnesota.
This summer, insurers that sell Medicare Cost plans are sending several hundred thousand letters to consumers about the transition. There's no change to coverage in 2018, they point out, while stressing that details about 2019 options aren't yet available.
"Stay calm. Check your mail," said Jim Schowalter, chief executive of the Minnesota Council of Health Plans, a trade group. "Set aside some time this fall to look at your options."
In the 1970s, the federal Medicare health insurance program for people age 65 and older started signing contracts with managed care plans on a cost-reimbursement basis, creating a private health plan option for some benefits.
Health plans in Minnesota were among the carriers that opted to introduce Medicare Cost health plans, and they maintained the coverage even after the federal government in the 1980s launched a different program that's now Medicare Advantage (MA).
In MA plans, private insurers also manage care for enrollees. But as the U.S. Government Accountability Office (GAO) explained in a 2009 report: "Unlike cost plans, MA plans assume financial risk if payments from [the federal government] do not cover their costs."
A federal law passed in 2003 created a "competition" requirement for Medicare Cost plans, which stipulated the plans could not be offered in service areas where there was significant competition from Medicare Advantage plans. Congress delayed implementation of the requirement several times until a law passed in 2015 that called for the rule to take effect in 2019.
Minnesota is one of the few places where this is a big deal.
Whereas roughly 20 million people are covered through Medicare Advantage plans, the federal Centers for Medicare and Medicaid Services (CMS) estimates 630,587 people across the country were enrolled in Medicare Cost plans this spring. The agency said Minnesotans account for more than half of the Cost plan total — about 400,000 people.
"To minimize confusion and ensure that seniors have the resources they need to make informed choices in a timely manner, we urge CMS to provide ... critical information about this transition as soon as possible," U.S. Sens. Amy Klobuchar and Tina Smith wrote in a letter to CMS officials last week.
Only three insurers sell Medicare Cost plans in the state — Blue Cross and Blue Shield of Minnesota, HealthPartners and Medica. For several years, Minneapolis-based UCare and Kentucky-based Humana have been the primary sellers of MA plans in Minnesota.
Allan Baumgarten, an independent health care analyst in St. Louis Park, said Cost plans have been a more profitable line of business for carriers than Medicare Advantage. Collectively, insurers earned more than $280 million in operating income from Cost plans over a three-year period, he said.
Companies that run Cost plans said the program has let them provide higher-quality coverage for enrollees, particularly in rural areas. In a statement, Eagan-based Blue Cross said the plans have saved the government money while also sparing health care providers from historically low Medicare rates in Minnesota.
Final decisions haven't been made on exactly which counties in Minnesota will lose Cost plans next year, the government said. But based on current figures, insurance companies expect that Cost plans are going away in 66 counties across the state including those in the Twin Cities metro. They are expected to continue in 21 counties, carriers said, plus North Dakota, South Dakota and Wisconsin.
Blue Cross plans on sending letters in early July notifying about 200,000 subscribers who stand to lose their Medicare Cost plans. Minnetonka-based Medica, which started sending letters last week, expects that about 66,000 members will need to select a new plan. Officials with Bloomington-based HealthPartners say the insurer sent letters to about 34,000 enrollees this month explaining the change.
While the transition will affect a lot of people, it won't directly affect most of the nearly 1 million Medicare beneficiaries in the state, said Ross Corson, a Commerce Department spokesman. There's no change for people who already are enrolled in MA plans, Corson said, or for those with original Medicare coverage.
Of the more than 300,000 people losing their Cost plans in Minnesota, it's likely that roughly 100,000 people will be automatically enrolled into a comparable plan with their current insurer, Corson said, unless they make another selection. Details haven't been finalized, he said. That likely will leave another 200,000 people, he said, who will need to be proactive to obtain new replacement Medicare coverage.
The details that people need for making decisions about 2019 coverage aren't yet available, said Kelli Jo Greiner, health policy analyst with the Minnesota Board on Aging.
"You don't need to do anything right now," Greiner said. "Enjoy your summer. In the fall, you will receive letters from either your plan or Medicare. That is going to tell you what you need to do."
Once full details from all carriers are available on Oct. 1, seniors can decide whether to go with original Medicare plus a supplement, which is sometimes called a "Medigap" policy, or join an MA plan.
MA plans feature a network of doctors and hospitals that enrollees must use to get the maximum payment, whereas supplements tend to provide access to a broader set of health care providers, said Shawnee Christenson, an insurance agent with Crosstown Insurance in New Hope. While that might sound good to beneficiaries, supplements can come with significantly higher premiums, Christenson said.
MA plans often include dental, vision and health-club benefits that aren't part of many supplements. Yet people who buy a supplement have the option of buying "stand-alone" Part D prescription drug coverage from any one of several insurers — a feature touted as one of the selling points for Cost plans, too. People in MA plans, by contrast, are limited to Part D plans sold by their MA carrier, Christenson said.
"Cost plans kind of gave them the best of both worlds," Christenson said. "Now, they're not going to get that — they're going to have to choose."
Another wrinkle is that people who want a supplement might have a better chance of getting into the coverage during the transition out of their Medicare Cost plan, when the supplement is provided on a "guaranteed issue" basis. Later, insurance companies can ask questions about a senior's health status and deny coverage depending on the answers, said Greiner of the Minnesota Board on Aging.
The coming change provides an opening for new competitors like Minnetonka-based UnitedHealthcare and a joint venture between Allina Health System and Connecticut-based Aetna to potentially sell more coverage for seniors in Minnesota. But Greiner said there's no information yet about which insurers might be selling coverage next year.
It all adds up to a busy fall for Medicare beneficiaries. At Twin Cities Underwriters, an insurance agency based in Roseville, Tom Peterson said he's already making plans.
"We're setting appointments for October now," Peterson said.
Christopher Snowbeck • 612-673-4744 Twitter: @chrissnowbeck
