Optima discontinuing Medicare Advantage program

NORFOLK

Optima Health, the insurance division of Sentara Healthcare, is dropping out of the market for managing Medicare benefits.

Despite that departure, the number of health plans for Medicare recipients in South Hampton Roads will increase slightly in 2012.

With Medicare Advantage plans, the government pays private insurers to manage the medical benefits of Medicare beneficiaries.

Medicare, for seniors and people with disabilities, is traditionally administered as a fee-for-service program by the federal government. The Advantage plans cover all of the services offered by original Medicare except hospice care, and also may include extra coverage, such as vision or dental.

Healthy seniors, people with limited incomes who don't qualify for Medicaid and the disabled often choose Medicare Advantage. This year, about 156,000 Virginians were enrolled in such plans - 14.2 percent of the state's Medicare beneficiaries.

Michael Dudley, Optima's president, said a rocky financial year and an uncertain future for the federal Medicare Advantage program prompted the company's decision to discontinue its Medicare Value and Value Plus plans as of Dec. 31.

"We just think that we've got two trains coming down a track headed right at each other," Dudley said.

Optima's Medicare Advantage plans lost more than $20 million in the past two years, with about $14 million of that in 2011, he said.

The insurer stopped offering a third Advantage plan this year, leaving about 3,000 members to find new coverage. Despite that change, overall enrollment in Optima's Medicare Value and Value Plus plans doubled to 14,000 in 2011. Many of the new members came from Cigna, which dropped its Advantage offerings after 2010, Dudley said.

Optima's new Medicare patients generally had more medical needs than those from the previous year, and the reimbursements weren't adequate to cover all of the services they required, said John DeGruttola, Optima's senior vice president of sales and marketing.

"That's been a real concern to us, and we have done our level best to try to manage it without disrupting services that are absolutely essential to people," Dudley said.

Payment rates for Medicare Advantage are set to shrink in coming years under the national health care overhaul. The cuts are meant to correct for overpayment to the private plans, which in 2010 received up to 13 percent more than the cost of care under traditional Medicare, according to federal officials. The new health law also calls for paying bonuses to plans based on quality ratings.

Optima officials worried that future federal budget plans would further reduce funding for Medicare Advantage. "We really don't see a way for this to improve," Dudley said.

People currently enrolled in an Optima Advantage plan will have a little more time than others to choose their next coverage. Like other Medicare recipients, they can choose a different offering or default back to fee-for-service Medicare during a seven-week open enrollment period beginning Oct. 15. Because they were a member of a plan that's ending, the enrollment period will extend through Feb. 29.

A strength of Optima's plan was its connection with Sentara health providers, said Jim Hutchinson, a supervisor with Senior Services of Southeastern Virginia.

"The key is whether doctors accept payment from them," he said. "If the doctor doesn't accept it or the hospital doesn't accept it, there's not much use in taking it."

With Optima's departure and other changes, Medicare recipients in South Hampton Roads will have 19 Advantage plan choices from five carriers in 2012, according to preliminary data from the federal Centers for Medicare and Medicaid Services. That's up from 17 options provided by six insurers this year.

Humana Inc. is adding two plans, for a total of eight. The company counts about 60,000 Medicare Advantage members in Virginia, including 15,000 in Hampton Roads.

"We see Virginia as a growth market," said Kevin Meriwether, president of senior products for Humana's East Region. "We see Medicare Advantage as a viable product nationwide despite the scaling back of the revenue coming to the plans, as we expected all along."

Earlier this month, federal officials said they expected a 10 percent increase in enrollment in Medicare Advantage plans. They said premiums will be 4 percent lower on average in 2012 with benefits remaining consistent with 2011 plans.

In South Hampton Roads, there will be eight plans charging no premiums in 2012, the same as 2011. Monthly premiums in 2012 range from $19 to $119, compared with $19 to $74 this year.

Further Medicare Advantage plan details become available on Oct. 1 on the Medicare Plan Finder at www.medicare.gov

Amy Jeter, (757) 446-2730, amy.jeter@pilotonline.com