"The only thing we have to fear is fear itself."
Franklin D. Roosevelt uttered these famous words in 1933 during the depths of the Great Depression, when banks in many states were closed and the unemployment rate surged to 25%. I mention this because we are hearing much the same rhetoric from the Obama administration as we strive to claw our way back from the worst recession since that time.
Whether or not the bailouts, stimulus packages and health care reform will turn out to be this century’s version of a New Deal remains to be seen. What is certain is that the current recession and our government’s reaction to it has only hastened the change coming to the Medicare system. And millions of seniors and insurance agents will soon begin feeling the effects.
When faced with change, the key for professional agents is knowing how the changes will affect the market and having a plan for how you’ll react. Here is a short list of some of the major changes to Medicare that have either already occurred or will occur in the near future:
1. M & N in 2010 — New Medicare Supplement plans will be introduced in 2010, with Plans E, H, I and J going away and At Home Recovery benefits replaced in favor of hospice benefits. Plans M and N will be introduced. These new plans will feature co-pays and lower premiums to lure consumers away from traditional first-dollar coverage associated with Plan F. They will also compete against Medicare Advantage plans that also have co-pays.
2. Rates Refreshed — Medicare Supplement carriers have an opportunity to refresh their rates in 2010 and there will be new entrants in the market. Expect to see fierce competition and innovation among private Medicare Supplement carriers in 2010.
3. Reduced Reimbursements — Reimbursement rates for Medicare Advantage plans are being reduced 4.5% for 2010 plans, forcing carriers to increase prices or co-pays for Private Fee-for-Service plans, reduce commissions or abandon the PFFS plans altogether. This will be followed by the elimination of deeming provisions for PFFS plans in 2011, essentially eliminating these plans in many markets.
4. PFFS Plans Perish — Some carriers have already indicated that they will non-renew the PFFS block and an estimated 500,000 Medicare beneficiaries will be forced to seek a new health plan for 1/1/2010 effective dates. Those receiving an Annual Notice of Change (ANOC) letter will be able to enroll in new plans as early as October 1st for January 1st effective dates.
5. HMOs and PPOs Expand — HMO/PPO plans will increase their service areas for 2010, reminding many of the Medicare+Choice days of the late 1990s. Expect to see a broader geographic footprint this time around as plans will not be restricted to the larger cities. The Part D coverage, PPO out-of-network provisions and low Maximum Out-of-Pocket features will make these plans attractive.
6. Recession Fallout — Plans may be forced to reduce Medicaid payments or eligibility criteria to help make up for budget shortfalls in California, Massachusetts and other states. Meanwhile, CMS has imposed stricter requirements on Special Needs Plans, reducing the number of available Medicare Advantage plans to serve the dual-eligible and chronic illness markets.
7. Opportunities in the Group Market — The Group retiree health market is imploding. Many Fortune 500 companies are dropping the subsidized health plans for their retirees in favor of Group Medicare Advantage or pushing the retirees into the individual market. Expect to see continued growth of services such as web sites and call centers that guide seniors coming off of group coverage in their search for affordable alternatives.
8. A Matter of Time — The baby boomers begin aging into Medicare by 2011, doubling the rate of age-ins from 2008. Starting in 2011 and for the next 20 years, 10,000 new retirees will be added to Medicare each day, representing 3.6 million people new to Medicare each year.
Throughout the 44-year history of Medicare’s existence, change has generally spelled opportunity, despite initial dire warnings and fear. For example, the standardization of Medicare Supplement plan designs in the early 1990s forced some carriers out of the market. Today, most agents would agree that seniors are more informed about their plan choices and actually seek out a particular plan type. Insurance sales have flourished and seniors have choices among an array of private plans and can buy direct or through a licensed insurance agent.
Certainly not all change is good and there is much angst over the state of the economy and what a government-run health care plan would do to potentially destroy what many consider to be the best health care system in the world. If only we can figure out how to extend coverage to all and find a way to fund it without further damaging the economy or rationing care!
But change is here nonetheless. Staying abreast of change and adapting to it is one of the best things a professional agent can do to prepare for the inevitable. While many of us will rail against the politicians, the business requires that we adapt and those who do will thrive as has been the case since Medicare was put into law by Lyndon B. Johnson. Another Democrat!