Shortly after announcing plans to hike payments to private insurance plans in Medicare Advantage, the Centers for Medicaid and Medicare Services proposed cutting those made to the 18 percent of Medicare Advantage plans sponsored by employers and unions.

Roughly 2.7 million retirees are enrolled in employer or union-sponsored MA plans, according to an analysis by Avalere.

As is increasingly the case with many benefits, they are more common among public sector employers than in the private sector.

Technically, CMS is not proposing cutting the payments.

It is suggesting that employer or union-sponsored plans no longer take place in a bidding process that critics have said allow insurers to pocket a larger profit margin than usual. Instead, insurers will receive a set amount, based on location.

As part of a lengthy explanation of proposed changes to rates, CMS framed its decision as freeing insurers from the obligation of submitting bids, which the agency said added to administrative costs.

But CMS also argued that insurers providing employer-sponsored plans are not vulnerable to the same level as risk as those competing in the individual Medicare Advantage market because they are essentially guaranteed access to a large pool of retirees from the same employer.

Furthermore, retirees in such plans tend to be healthier than average Medicare beneficiaries.

And yet, the agency pointed out, the lower risk has not been led to lower bids from such plans; last year they were in fact 1 percent higher than MA plans bidding for the individual market.

Obviously, insurers aren’t happy with any attempts to rein in profits and will likely battle CMS’ proposal.

“If you start down a path of disincentivizing employers, employers are likely to drop that coverage, and the burden shifts back to the government,” Mary Grealy, president of the Healthcare Leadership Council, told Modern Healthcare.

Instant Insights /

CMS proposes cuts to employer-sponsored Medicare plans

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