In a move that cuts into a key contributor to Excellus Blue Cross Blue Shield’s bottom line, the Rochester Area School Health Plan is switching its retiree health plan from Excellus to Aetna.
The switch, which takes effect in January, moves 8,000 Medicare Advantage enrollees out of Excellus’ coverage and into Aetna’s. The consortium’s under-65 members remain in a plan administered by Excellus.
Formed in 2004, RASHP is self-funded insurance plan encompassing all of Monroe County’s 17 school districts and the county’s two Board of Cooperative Educational Services organizations. With more than 15,000 non-retiree individual members, the school district health plan ranks among the region’s largest employer groups.
Because Excellus no longer offers plans on the open market comparable to the consortium’s deal, calculating savings RASHP realizes over what its member districts would pay individually would involve too much guesswork, says John Abbott, RASHP vice chair and East Irondequoit deputy superintendent. According to the Monroe County School Boards Association, the consortium shaved $67 million off of its members’ employee premium costs in 2009, the last year, Excellus did offer comparable plans.
Retired teachers and administrators are not covered under the consortium’s self-funded plan, but RASHP uses its clout to negotiate better Medicare Advantage deals for retirees than they could generally find as individuals.
For retiree coverage, says Abbott, this year “we decided to shop around.”
The RASHP consortium hired Gallagher Consultants to design a bidding process and then asked five insurance companies to bid for its retirees’ business. Three—Excellus, Humana and Aetna—responded. Aetna won.
Citing a policy against sharing employer groups’ plan details, Excellus spokesperson Joy Auch declined to comment on the consortium’s switch to Aetna.
Aetna’s ability to offer national coverage was a key factor in its favor, but members’ costs were also important, Abbott says. While Excellus can cover out-of-town claims through its national Blue Cross/BlueShield affiliation, extra paperwork is usually required.
For retirees and under-65 members, plan details differ from district to district. But for retirees from all districts, benefits and costs under Aetna are equal to or better than Excellus’ Medicare Advantage offerings, Abbott says.
Hilton School District retirees, for example, paid quarterly premiums on top of Medicare Part B monthly premiums for Excellus coverage. While offering comparable benefits, their new Aetna plans will charge no premiums.
While the 8,000 school district retirees covered under the school district consortium’s health plan represent a small fraction of Excellus’ approximately 1.5 million members, the switch will take a substantial cut out of what is probably one of Excellus’ most profitable lines of business, if not its most profitable.
According to the Kaiser Family Foundation, health insurers’ average 2021 gross margin on Medicare Advantage plans outpaced profits on employer-based group plans by more than $1,000 per enrollee and topped profits on individual-market and Medicaid plans by nearly $1,000. In some previous years, Medicare Advantage profits were even higher.
All Americans 65 and older are entitled to coverage under the government-run Medicare program. Medicare Advantage plans offer Medicare coverage benefits but are administered by private insurers. Unlike traditional Medicare, which does not cover prescription drugs, Medicare Advantage plans wrap in drug coverage.
Traditional Medicare and Medicare Advantage enrollees pay a monthly Part B premium, which the government generally subtracts from enrollees’ monthly Social Security payments. Current Part B monthly premiums for most Medicare enrollees cost $164.90. They are slated to go up to $174. Medicare Advantage insurers charge premiums on top of Part B costs ranging from zero to hundreds of dollars a month.
Traditional Medicare pays 80 percent of medical costs, requiring enrollees to cover some medical costs out of pocket or pay extra for private, government-approved Medigap plans that pick up most or all of the costs Medicare doesn’t cover.
Medicap plans come in 10 varieties. Some require co-pays and deductibles, but the most expensive Medigap plan covers everything with no out-of-pocket costs. While benefits for each variety of Medigap plan are set by the Centers for Medicare and Medicaid Services, premiums charged by private insurers for comparable plans vary from company to company.
Chosen by 60 percent of traditional Medicare enrollees, Medigap Plan F, which has no out-of-pocket costs but charges the highest premiums, is the most popular. Premiums for Medigap plans vary among insurers. Enrollees’ age and location are factors.
Nationally, Plan F premiums average $150 a month, bringing a typical enrollee’s total monthly premium to more than $300. Traditional Medicare enrollees who want prescription drug coverage have to separately purchase Part D drug plans, which at current rates on average add another $32.70 a month to premium costs.
Health insurers’ Medicare Advantage profits are slated to fall. A factor that has made such plans money makers for insurance companies is plans’ ability to charge Medicare for more serious diagnoses. Critics have contended that health insurers have routinely “upcoded” enrollees’ diagnoses, overcharging Medicare to pad their bottom lines.
A 2014 Center for Public Integrity investigation claimed to have identified nearly $70 billion in risk-adjustment “errors” by a wide swath of Medicare Advantage plans from 2008 to 2013.
Among alleged overcharges CPI named were $41 million paid to Excellus. According to CPI, Excellus ultimately returned only $157,777 of the alleged overcharges.
In March, the Biden administration finalized rules that would lower some rates paid to Medicare Advantage plans. The changes are to be phased in over three years.
Will Astor is Rochester Beacon senior writer. The Beacon welcomes comments and letters from readers who adhere to our comment policy including use of their full, real name. Submissions to the Letters page should be sent to [email protected].