COVID-19 and Medicare Advantage bidding uncertainty: 3 notes

Uncertainty induced by COVID-19 is complicating the job of health plan actuaries, who are currently making financial decisions about costs, premiums and benefits for 2021. Steven Lieberman, a nonresident fellow at the USC-Brookings Schaeffer Initiative for Health Policy, expects actuaries to raise plan bids for 2021 — but offers proposals to limit the amount of uncertainty when it comes to bidding.

Mr. Lieberman outlined the proposals in a May 18 blog post for the USC-Brookings Schaeffer Initiative for Health Policy. The initiative is a partnership between the Economic Studies at Brookings program and the University of Southern California Schaeffer Center for Health Policy & Economics.

Here is a three-point recap of the proposals Mr. Lieberman presented. View the full proposal, including methodologies, here

1. Use the CMS Innovation Center's existing demonstration authority to create a mandatory program for 2021 Medicare Advantage bids that:

  • Limits a plan's losses if it sees an unexpected number of patients with costs above a pre-set catastrophic threshold 
  • Limits a plan's losses or claws back excess profit if actual costs are significantly higher than bids

2. Under the proposals, the parameters for Medicare high-cost reinsurance would rely on past spending data. The data would be used to compute the expected cost of the reinsured part of spending and the percentage reduction in premiums needed to offset expected costs.

3. The programs would have to be rapidly implemented to avoid delaying open enrollment. 

More articles on payers:
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Payment 'recalibration' ahead for insurers, BCBS Association exec says
Highmark BCBS premium notice error sparks state action

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