Medicare Eligibles	Medicare Advantage
California, Florida, New York, Texas and Pennsylvania have the largest concentrations of Medicare eligibles in the country. Each state is home to more than two million eligibles. Ohio, Illinois, Michigan, Virginia, North Carolina, Georgia, New Jersey and Massachusetts each have more than one million eligibles. These are prime target markets for Medicare products.	California, Florida, New York, Pennsylvania and Ohio currently lead with respect to Medicare Advantage concentration. Texas has one of the highest concentrations of Medicare eligibles. Yet Medicare Advantage growth has not been on par. Will regional PPOs eventually make inroads in Texas?

Source:Mark Farrah Associates and CMS data resources

 June 10, 2009
Medicare Supplement Revival
By Debra A. Donahue

Leading insurers, such as WellPoint, have indicated that Medicare Supplement (also referred to as Medigap or Med Supp) products will play a significant role in their strategy to attract more senior members during 2009. Designed to cover gaps in the traditional Medicare program, Medicare Supplement policies emerged in 1966 side-by-side with the introduction of Medicare. For years Congress has passed legislation that has been detrimental to this product line. Today, Medigap products compete against a host of managed Medicare options. However, with advantages of choice, simplicity, portability and years of experience, Med Supp plans continue to offer an alternative to managed Medicare. And, to the surprise of many, are growing once again.

Enrollment Gains

After several years of about 3% per annum membership declines (based on MFA research), Med Supp plans finally saw an increase for year-end 2008 of 0.6% total covered lives. As of December 31, 2008, 22% of all Medicare eligible beneficiaries, roughly 9.6 million individuals, were enrolled in a Medigap plan. Over 196 companies offered Medicare Supplement products, with eight companies insuring 59% of total covered lives. UnitedHealth Group, the largest company offering Med Supp plans, serves nearly 30% of the market.

All three of the top Med Supp companies, UnitedHealth, WellPoint and Mutual of Omaha saw enrollment growth between 2007 and 2008. One caveat that should be noted here is that the California market is underrepresented in this analysis because managed care organizations in that state do not report plan membership to the National Association of Insurance Commissioners (NAIC), the underlying source of MFA MEDICARE SUPPLEMENT Market Data.

Current Period Gains

Medicare Supplement covered lives are reported in two groups: those policies that were written in the most recent three years and those written prior to that time. At year-end 2006, 34.3% of in-force policies were written in the preceding three years. By year-end 2008 that number had jumped to 34.8%, indicating that new policies are still being written after the advent of Medicare Advantage.

The increase in new policies written occurred even though 40% of the 196 plans did not write any policies in the last three years. Most new growth is happening in the top plans who also offer the alternative managed Medicare options.

Source of Enrollment

Almost 80% of Medicare Supplement insurance is purchased by individuals. This should not come as a surprise given employer cut backs on retiree benefits over the last ten years. Over 110 companies currently compete in the individual Medicare Supplement market, with the leader, UnitedHealth, capturing 17% market share. The individual segment is much more competitive than the employer group sector.

Eight companies insure 92% of the Medicare Supplement plans sponsored by employers. In fact, UnitedHealth alone captures 77% of the employer group segment. Furthermore, over half of UnitedHealth’s Med Supp enrollment comes from employer group contracts. WellPoint, on the other hand, derives 93% of its Med Supp enrollment from individual policyholders.

Standardized Plan Types

Medicare Supplement plan benefit designs are standardized by the federal government with a few exceptions. Massachusetts, Minnesota and Wisconsin are considered waiver states, with slightly different plan offerings, and several Blues plans report a Plan type of P. Several types of standardized Medigap plans are available, from basic options such as Plans A & B that cover coinsurance and copayments for Medicare Parts A & B, to more comprehensive products such as Plans F & J. Plan F, the most popular design, covers Medicare deductibles as well as coinsurance and copayment costs and is purchased by 44% of people with Medigap coverage.

One of the constant challenges in the Medicare Supplement market is keeping up with public policy changes. New standardized Plans K and L were added when the Medicare Prescription Drug Improvement and Modernization Act of 2003 went into effect and the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) calls for the addition of two new Plans M & N and the elimination of Plans E, I, H and J by mid-2010. Over one million people will be impacted in 2010 when the four plans are eliminated.

More than 65% of all seniors were enrolled in either Medicare Supplement or Medicare Advantage products as of December 2008. As an alternative product to managed Medicare or Medicare Advantage, Medicare Supplement products are holding their own.

Burgeoning opportunities for Medicare Supplement products include the legislated decline of Medicare Advantage Private Fee for Service options, the aging baby boomers – and the use of “Age In” marketing strategies, pre-Medicare retirees, seniors losing employer-sponsored benefits, disabled Medicare beneficiaries and international health coverage options. Medicare Supplement insurers, as experts in serving the individual and gap coverage markets, may also find opportunity in the development of similar products for the growing high deductible health insurance and limited benefit options being offered by employers.

About MEDICARE SUPPLEMENT Market Data

Medicare Supplement Market Data are comprehensive data files that include state-by-state membership, premiums, claims and loss ratios for Medicare Supplement plans nationwide. Complete with interactive tables for analyzing competitors & state markets and comparing business for group versus individual policies. Medicare Supplement data is included as a sub-series in Health Coverage Portal™. Data filed with the National Association of Insurance Commissioners is aggregated and analyzed exclusively by Mark Farrah Associates. To purchase this data, please contact MFA at 207-985-8484.

About Mark Farrah Associates (MFA)

Mark Farrah Associates (MFA) is a leading data aggregator and publisher providing health plan market data and analysis tools for the healthcare industry. We are a licensed redistributor of NAIC data. MFA’s Health Coverage Portal™ includes both risk-based and administrative services only membership and financial data by plan, parent, state, region and nationally. Committed to simplifying analysis of health insurance business, our products include Medicare Business Online™, the Health Coverage Portal™, Health Insurer Insights™, and Health Plans USA™.

Healthcare BS is a FREE monthly brief that presents analysis of important issues and developments affecting healthcare business today.

Debra A. Donahue is Vice President of Market Analytics and Online Products with Mark Farrah Associates.