In the headlines today, Aetna made a huge splash announcing they were purchasing Coventry HealthCare for $7.3 billion in cash and stock. You can read the press release here. This makes Aetna one of the largest providers of Medicare Advantage plans in the country. It also increases their footprint in the Medicaid market with Medicaid eligibility set to expand under the new healthcare law.
Much of this is due to the new Medical Loss Ratios (MLRs) requirement of the new Affordable Care Act as big insurance companies consolidate in an effort to remain profitable. The MLR requires insurance companies to spend 80% of their revenue on healthcare-related expenses. Any amount less than 80% must be refunded to individuals, rather than kept as profit. This is forcing insurers to get creative in finding new members as their marketing expenses directly compete with revenues.
So how does this affect the Medicare beneficiary who has Coventry or Aetna? In the short term, there shouldn’t be a noticeable difference for 2013. The deal is far from complete, with a projected close date of fall 2013. Because Medicare Advantage plans sign annual contracts with the government, plan offerings for 2013 have been in the works since early 2012, well before this announcement. Most likely, any changes would occur in 2014 or later.
In the long term, things may look a little different. Aetna does not have a strong footprint on individual Medicare Advantage enrollment in Missouri and it will be interesting to see if they keep the Coventry plans comparable to what they look like now or if they make them look like the Aetna plans in other regions. Earlier in 2011, Coventry purchased Mercy Health Plans, a regional plan here in the Saint Louis area. With that acquisition, Coventry did little to the “guts” of the Mercy options and simply re-branded them with the Coventry name. They left the core benefits intact. It is probable that Aetna does the same thing, especially in the greater St. Louis area, as Coventry has a strong local network of doctors, high star ratings from Medicare, and an alignment with the Washington University Physicians Group and Barnes Jewish Hospitals.
If you are concerned with this acquisition and think a change may be in order, the Medicare Annual Enrollment Period is right around the corner. The Medicare AEP is the time of year where you can elect to change to a different Medicare Advantage Plan. You have from October 15th until December 7th to elect a new plan. If you think that a different insurer would benefit you, take a look at Humana or United Health Care. Humana has a plan that is also accepted by Washington University Physicians and both of these companies have excellent options in St. Charles and surrounding counties.
As always, we are here to help. If you need a detailed analysis of your situation, don’t hesitate to give us a call.