UnitedHealthcare is facing enrollment restrictions next year in one of its Medicare Advantage health plan contracts, regulators say, because the insurer hasn't been spending a large enough share of revenue on the health care needs of enrollees.
The sanction from the Centers for Medicare and Medicaid Services (CMS) applies to just one of United's many contracts with the federal government to sell Medicare Advantage health plans and doesn't apply to coverage sold in Minnesota.
Minnetonka-based UnitedHealthcare, the nation's largest health insurer, says it fell out of compliance due to federal legislation that reduced the insurer's tax liability last year. The sanction applies to a health plan contract for coverage sold in nine states to less than 1% of the company's roughly 6 million Medicare Advantage members. The states include Florida, Georgia, Kansas, New Hampshire, New Jersey, Ohio, Oklahoma, Texas and Virginia.
"CMS imposed enrollment sanctions on a subsidiary of UnitedHealthcare … because the organization did not meet a Medical Loss Ratio (MLR) of at least 85% for a third consecutive year," CMS said in a response to Star Tribune questions.
"This enrollment suspension will be in effect for contract year 2020," the federal agency said. The federal MLR rule "requires that a percentage of revenue should be used for patient care, rather than for other items [such] as administrative costs or profit."
UnitedHealthcare is one of the nation's largest sellers of Medicare Advantage plans, a newer form of Medicare coverage in which enrollees opt to receive federal health insurance benefits through a private managed care company. In 2019, roughly one-third of Medicare beneficiaries are opting for Medicare Advantage coverage, according to the Kaiser Family Foundation, as opposed to receiving benefits through the original Medicare program.
The federal government monitors the share of revenue that Medicare Advantage plans spend on patient care needs, vs. the amount spent on administration and kept as profit. This measure is called the "medical loss ratio," and it's a standard way for regulators and consumers to assess the profitability of health plans.
When a Medicare Advantage plan's MLR drops below 85% for three consecutive years, the government can suspend new enrollment in the plan while letting current enrollees maintain the coverage. In a Sept. 11 letter to UnitedHealthcare, CMS said the medical loss ratio (MLR) was 71.3% in 2016, 83.9% in 2017 and 84.1% in 2018 for health plans within the contract that's being sanctioned.
In a response to Star Tribune questions, UnitedHealthcare said the MLR last year fell below the mark — despite added benefits — because the company saw a financial benefit from the federal Tax Cut and Jobs Act, which became law in late 2017. The company says it subsequently factored the change into its calculations and anticipates achieving an MLR above 85% in 2019.
"While we won't be enrolling new members in [this contract] for 2020, existing members will continue to receive the same level of care and support, including an increase in their coverage and benefits," the insurer said in a statement. "UnitedHealthcare also has additional Medicare Advantage plans available in many of these markets."
"We anticipate that we will achieve the MLR threshold in 2019 for [this contract], which will allow us to resume enrollment in these plans in 2021," UnitedHealthcare said.
The health plan contract that's being sanctioned primarily provides coverage for people who quality for benefits from both Medicare and the state-federal Medicaid program. UnitedHealthcare officials have said these products for "dually eligible" enrollees are an important growth area for the company.
If the MLR for a Medicare Advantage plan falls below the 85% mark for five years, the government can terminate its contract with the health plan. CMS says the regulatory action against UnitedHealthcare is the first time the agency has suspended enrollment in a Medicare Advantage plan due to noncompliance with the MLR rule.