News from SRG

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...has brought some proverbial good news, bad news to health insurance organizations that offer Medicare Advantage plans. On one side, the reimbursement cuts that have been occurring over the past few years have finally begun to stabilize. The reduction of these reimbursement rates by the federal government had been a serious problem for health plans covering Medicare Advantage beneficiaries and led to a significant increase in competition within the market. The bad news, however, is that the quality rating system for Medicare Advantage plans will soon get more difficult.

The five star rating system is moving away from a fixed scale and is shifting to awarding stars based on performance in comparison with the industries top performers. Essentially, plans will now be graded on a curve where the best Medicare Advantage plans will set the standard that the others will be measured against. This means that companies will no longer need to worry about cuts from the federal government, but rather focus on improving the quality of care for beneficiaries in order improve their ratings. In order to do so they will have to reinvest significant amounts of capital into adapting their plans to include new benefit arrangements and improving the customer experience.

This new approach will result in the restructuring of business models and Medicare Advantage plans to cater to the needs of the individual. Enhanced collaboration between insurers, physicians and patients will eventually lead to optimized care and be financially beneficial to all parties. The end result will be a system of coordinated care that produces better results for the patient and, in turn, better ratings for the plans.

With the rate cuts beginning to ease, companies who have already invested into improving their Star ratings and reducing administrative costs are at a serious advantage. They will be able to continue to design new, more efficient plans, which, in turn, will improve their ratings. This will ultimately result in them capturing a larger market share by claiming beneficiaries from the smaller companies who cannot compete with their ratings. Consolidation is inevitable, as those smaller companies will be forced to either join forces with one another or accept an acquisition proposal.

Growth in the Medical Advantage plan market has been steadily increasing and is expected to continue to do so for the foreseeable future. Companies that are able to adapt to the changing environment and invest into new capabilities will capitalize on this growing market, while those who remain stagnant suffer. Ultimately, the plans with the highest quality rating, lowest administrative and medical costs, and those that meet compliance standards will be the ones that survive.