By Arielle Elliott
For many seniors, Medicare Advantage PPOs provided a middle ground between the higher costs of MedSupp and the network limitations of HMOs. By the start of last year’s AEP, 40% of MA members (non-SNP, non-EGWP) were in PPO plans. That number had been steadily rising over the last five years, with 4.3 million members added since the 2020 AEP (compared to 1.9 million for HMOs).1
This year, the upward growth for PPO may be coming to an end. With the reimbursement rates to MA carriers not increasing at the rate of inflation, many MA carriers have been financially pressured into making dramatic changes to both benefits offered and the range of plans available. The rate of plans being termed or reduced is substantially higher than in recent years. To put this in perspective, last AEP nearly 99% of MA members were in 2023–2024 renewal plans, with barely 1% forced to switch due to a plan elimination.2 Meanwhile this year, 8.9% (1.8 million members) of non-SNP, non-EGWP MA members are in terming plans.
With Deft Research’s MAPD & PDP Disruption Tool users are able to compare which markets, regions, and plan types are experiencing the most disruption. By shifting between plan types, we can see that of those 1.8 million members in terming plans, 1.3 million are in PPOs. That means 14.9% of MA PPO members are in terming plans and will be forced to change their coverage this AEP.3 While all states are impacted, much of this impact is concentrated in regions where most to all PPO plans are being termed.
So what kind of coverage do we expect these termed PPO members to shift into? With a selection of $0 PPOs plans still widely available across the country (at least one PPO plan is still available to virtually all Medicare eligibles) the initial effects may look like a consolidation toward the PPOs that remain. That means those remaining plans may be dealing with a lot of new members, and if zero PPO is truly unsustainable in the current market, they may be facing high MLRs next year.
Though with this scale of disruption, the percent of all MA lives in PPO will undoubtedly decrease in 2025. Cross-product switching tends to be unpopular among MA and MedSupp members alike, and for the three-quarters of MA members in $0 premium plans a switch to MedSupp may mean an increase in upfront costs that may not be feasible. Specifically, 6.17 million MA members in PPO plans have $0 premiums (compared to 10M in HMO)1 and will be the least receptive to moving to MedSupp.
We will likely see a segmentation between termed members who chose MA for affordability moving to HMOs, while those who can afford the higher premiums and prioritize wide access being most likely to switch to MedSupp. For those who do want to switch, a plan termination provides a unique opportunity to enroll in MedSupp without worrying about preexisting health conditions. Finally, a middle ground option for termed PPO members who fall somewhere between these two segments is Medicare Select, a MedSupp policy with network requirements and generally lower premiums. While it would still mean switching coverage types, the lower premiums will likely be attractive to former MA members who are used to network restrictions.
Any MA member who received a term letter will have a Special Election Period, which means they will not need to go through medical underwriting in order to switch to MedSupp. For many termed MA members, this provides a unique opportunity to switch. While any growth that results from this may be generally positive for MedSupp, a potential influx of new members who skipped underwriting could translate to an increase of higher risk members (which may eventually lead to rising premiums).
The bigger question here is if this becomes a trend and MA PPOs continue to shrink, what will that mean for the selections of future new Medicare enrollees? At the end of the day, people are going to pay for what they can afford. If MA continues to reduce plans with wide network options and strong benefits, MedSupp will attract an even larger share of the higher-income new Medicare enrollees in coming years. Long term, should PPO continue to shrink, the MedSupp industry stands to benefit substantially. Seniors who want wide-open access will have pay for it in MedSupp premiums, not $0 PPO MA.
1 Deft Research MAPD Growth Tracker
2 Deft Research 2024 Medicare Shopping and Switching
3 Deft Research MAPD and PDP Disruption Tool