Here is what you’ll find in this week’s newsletter!

1. Important links 🔗 - the best articles we found this week about the Medicare Market along with links to Jared’s recent LinkedIn posts.

2. Deep Dive 📚 - Supplemental Benefits in Medicare Advantage 🌼

3. Sponsor Snapshot 🚀 - brought to you by MMI+

4. Compliance Chatter 📢 - Several new regulations to review!

It’s only a 5 minute read, but it will make you 10x smarter.

DEEP DIVE 📚

Supplemental Benefits in Medicare Advantage 🌼

Today we will be diving deeper into supplemental benefits frequently included in Medicare Advantage (MA) plans.

This broad category can include a wide array of specific benefits, and some of them are basically a given these days. Before diving into those details, we will start with a refresher on some MA financial mechanics.

Medicare Advantage bid and rebate process

The MA bid and rebate process is part of how the federal government sets the funding for private health plans under the MA program. Here's a summary of how it works:

Bidding Process

MA Plans Submit Bids: Private health insurers offering MA plans submit annual bids to the Centers for Medicare & Medicaid Services (CMS). These bids represent the plan's projected cost to provide services to a typical beneficiary.

Bid Comparison to County-Level Benchmark: The submitted bid is compared to a benchmark—a set payment amount that CMS determines for each county, based on traditional Medicare spending for beneficiaries in that county.

Bid Below Benchmark: If the plan's bid is below the benchmark, the plan is eligible for a rebate.

Bid Above Benchmark: If the plan's bid is above the benchmark, it must either charge the beneficiary a premium or scale back benefits.

Rebate Process

Rebate Calculation: If an MA plan’s bid is lower than the benchmark, the plan receives a rebate. This rebate is a percentage of the difference between the benchmark and the plan’s bid.

Rebate Distribution: The rebate must be used by the plan to offer enhanced benefits or reduce premiums for beneficiaries. The exact use of rebates varies by plan but is generally used to make the plan more attractive to enrollees (e.g., by reducing out-of-pocket costs or offering extra benefits like dental, vision, or wellness programs).

Percentage of Rebate: The size of the rebate depends on the difference between the bid and the benchmark, as well as a “rebate percentage” set by CMS. Plans in counties with higher benchmarks typically receive higher rebates.

Impact on Beneficiaries

Plans that submit competitive bids and receive rebates can offer additional benefits or lower premiums, making them more appealing to beneficiaries.

The bid and rebate process is designed to encourage MA plans to be more cost-efficient, as plans that manage costs effectively can pass savings to beneficiaries.

There are certainly variations at a more granular level that are not apparent here, but there are several interesting takeaways we can derive from these aggregate values:

• The annual growth rate in the Per Member Per Month (PMPM) benchmark over the 10-year period of 2014-2023 was 3.9%

• Compare that to the bid growth rate over the same period: 2.7%

• The rebate as a percentage of the dollar difference between benchmark and bid has grown only slightly, from 63% to 67%

• Yet the average PMPM rebate has grown at a rate of 10.3% - how? Well, the Rebate/Bid ratio has doubled, from 10% in 2014, to 20% in 2023.

How are Rebate Dollars Used?

We have discussed the growth in MA plans previously. Combining that with these trends in rebates, what’s the bottom line here?

MedPAC estimates that Medicare paid MA plans approximately $83 billion in rebates in 2024. This total “reflects growth in both MA enrollment and rebates paid per enrollee.”

Remember these rebates can be used to either enhance benefits or reduce premiums. The estimated allocation of those rebates is broken out here.

This shows the average, but the breakdown differs for conventional MA plans and Special Need Plans (SNPs).

For 2024, the largest proportion of conventional plan rebates (39%) were expected to be allocated to reduce cost sharing.

On the other hand, SNPs were expected to allocate the vast majority of rebates (85%) to non-Medicare services, which makes sense – these plans are tailored to high-need beneficiaries with specific conditions, so it adds value and makes the plans more appealing if the carriers also tailor services to meet the needs of the covered population.

Supplemental Benefits

What types of services are we talking about here? Kaiser has compiled helpful comparisons over time, showing trends for Individual/Conventional plans and SNPs.

Focusing in on 2025 plans in particular, a few things stand out:

• Some level of Vision, Dental, and Hearing services are included in 94% or more of all plans.

• Fitness benefits are included in 95% of individual MA plans, but a slightly lower 83% of SNPs.

• Over the Counter benefits are flipped the other way – 92% of SNPs offer those, and 73% of individual plans.

• Transportation and Bathroom Safety Device benefits are much more prevalent in SNPs. To a lesser degree, the same is true for In-Home Support and Meal benefits.

What happens next?

The plans are built, benchmarks are set, rebates are calculated – now what? A “typical” insurance product management cycle would involve tracking benefit incidence and severity, comparing against expected values, and making adjustments if necessary. However, in the fast-paced world of AEP, frequent plan switching, and bid deadlines, this can be a challenge!

According to survey results reported here and here, the additional benefits in MA plans are viewed as important by beneficiaries, with many reporting that they use those benefits. However, some MA plans have also reported that utilization of supplemental benefits is low, leading to some recent efforts by CMS to collect more data and require more reporting on these benefits for beneficiaries.

 Additional data collection

​In the interest of transparency, CMS added supplemental benefit reporting requirements for MA plans starting in 2024. These requirements include:

• Total number of enrollees eligible for the benefit

• Count of enrollees who used the benefit at least once

• Total utilization instances

• Amount incurred by the plan to offer the benefit

• Enrollee out-of-pocket cost per utilization

This data should have been reported to CMS by now, but it is unclear when or if it will be made publicly available.

Enrollee Notification

Starting in 2026, MA plans will be required to issue a “Mid-Year Enrollee Notification of Unused Supplemental Benefits.” This notice will inform enrollees about details related to their supplemental benefits, listing the specific benefits that went unused in the first six months of the year. This notice will also provide information on the scope of the benefit, any network and cost-sharing requirements, and instructions on how to use the benefit, and a contact number to use for additional information or assistance.

Though the collection and reporting of this data will require resources, it is hard to argue against more data being better for the entire MA program.

Still, unanswered questions about supplemental benefits will very likely remain...

• Will utilization data change the specific benefits offered?

• Will anyone be able to create thorough cost/benefit analysis for specific benefits?

• Who will find the most value in this additional data…CMS? The public? MA plans?

• Will notifications drive changes in benefit utilization? Or in plan design? Or in the cost of providing those benefits?

One known is that the MA space continues to rapidly change. This is one of many details we will be watching!

That’s all for today. Thanks for reading!

If you’re ready, here are some ways we can help you:

• Newsletter Sponsorship opportunities: Promote your product or services to leaders in the Medicare space. Let’s discuss. (link)

• Market Research: Reports that help you wrap your arms around the Senior focused insurance markets. (link)

• Consulting: We can help you develop new insurance products for the Medicare market, appraise your books of business, and keep you compliant. Let’s discuss. (link)