MA and PDP Consolidations Prove It Pays to Run With the Best

  • Originally published January 20, 2012 , last updated January 12, 2016
  • Medicare
MA and PDP Consolidations Prove It Pays to Run With the Best

The Medicare Advantage and Part D market is beginning to look like the wild kingdom lately, with the carriers at the top of the food chain swallowing up smaller ones, expanding their footprints and consolidating the market.

Just a few of the major acquisitions include:

  • CVS Caremark acquiring Universal American’s PDP business
  • CVS Caremark acquiring HealthNet’s PDP business
  • Cigna acquiring Health Spring’s Medicare Advantage business
  • Humana acquiring Arcadian’s Medicare Advantage business
  • UnitedHealthcare acquiring Care Improvement Plus

There are just the major acquisitions. There are numerous other examples of major carriers consuming smaller regional HMO plans recently as well.

Carriers are consolidating for several reasons, but really it comes down to the fact that many smaller carriers simply don’t have the resources to compete in today’s environment. It costs a lot of money and resources to develop and maintain networks and make the improvements required to achieve higher quality star ratings that would result in greater reimbursements from the government. The Affordable Care Act lowered carrier reimbursements, but the fact is that many of the higher quality carriers can make more money under today’s reimbursement rules if they achieve high enough quality stars. But how many of the smaller players can afford to make the necessary improvements to compete for those dollars? The ones who can’t are getting out of the market and the larger players are swallowing up their business.

The paradox of 2011 was that we saw massive shakeout among the carriers with all the consolidation, but we saw very little disruption at the plan level. In other words, many of the larger carriers were very aggressive in terms of acquisitions, but were actually quite conservative in terms of plan design. So we actually saw more stability in 2011 in terms of fewer consumers switching plans. We expect this to change in 2012. We anticipate aggressive moves from the top carriers as they attempt to improve service quality, health care outcomes and overall patient satisfaction.

This is exactly why Senior Market Sales has been saying for years that we “run with the best.” The larger carriers with greater resources are the ones who will emerge from this shakeout. Agents who want stability in their product portfolio should look to the major players. Go to www.MAforAgents.com and www.PartDforAgents.com to see which companies SMS works with.