How Medicare Advantage Insurers Will Be Affected By Proposed 2024 Payment Cut

Medicare Advantage insurers might see an average 2.27% reduction in baseline payments in 2024, the Centers for Medicare and Medicaid Services said Wednesday. If the idea is approved, according to StatNews, the industry will see a net loss of more than $3 billion.

What Happened: Medicare authorities are seeking to update data and coding methods that are used to describe the health conditions of an insurance company's enrollees, which is the rationale behind the proposed pay cut. Insurance companies would not generate as much revenue from members with certain diagnoses under that new approach.

Insurers including CVS Health Corp CVS, UnitedHealth Group Inc UNH, Cigna Corp CI, Humana Inc HUM, and others are affected by the proposal.

The proposed cut compares to a 5% increase (4.48% proposed) in last year's rulemaking process, Oppenheimer & Co said in an industry note Wednesday, and a 3.3% average increase over the last five years.

The plan comprises a 2.09% core rate hike, a negative 3.12% normalization factor, and an anticipated negative 1.24% Star Ratings-related decrease.

The majority of plans saw a decrease in star ratings as a result of the COVID-era hold harmless provisions' expiration in 2021/2022. This will vary by insurer.

In the previous five years, rates in the sector averaged 3.3%. Prior to those five years, however, the sector managed with growth below that level successfully. The increases between 2016 and 2018 were 0.85% on average.

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