Humana, Cigna take a hit in Medicare Advantage star ratings


The federal government’s release of 2017 Medicare Advantage star ratings did not bring good news for Humana and Cigna, as the major insurers earned lower quality ratings despite the overall percentage of highly rated plans remaining static.

The Centers for Medicare & Medicaid Services’ five-star ratings of private Medicare plans are a significant factor in insurers' financial performance, as higher ratings are tied to considerable federal bonus payments and greater enrollment figures.

But for Humana, a major player in the MA space, the share of its plans with four stars or higher dipped from 78 percent to 37 percent for 2017, the company said in an announcement. The decline, according to Humana, is primarily due to lower scores on certain measures as a result of the company’s now-closed program audit by CMS. It added that it plans to take “certain operational actions” to mitigate the negative effects of the ratings dip.

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The news is more positive, however, for Humana’s potential acquirer, Aetna. For 2017, 91 percent of the insurer’s MA members will be in four-star or higher Medicare Advantage and prescription drug (MA-PD) plans, it said, noting that it has the highest percentage of Medicare members enrolled in four-star plans among publicly traded companies.

Cigna also saw a reduction in its ratings, as next year about 20 percent of its MA customers will be in plans with four stars or higher, the insurer said in a Securities & Exchange Commission filing. Like Humana, it said the ratings dip is attributable to a CMS audit; in January, the agency banned Cigna from selling new Medicare products due to “substantial failures” to correct compliance violations.

“Humana believes that its star ratings for the 2018 bonus year do not accurately reflect the company’s actual performance under the applicable star measures,” the Louisville-based company said in its announcement, adding that it plans to file for reconsideration of certain ratings. Cigna expressed a similar sentiment, adding that the payer plans to "work fully with CMS through their process to ensure that they have the information and analysis needed to calculate final stars ratings that more accurately reflect our performance.”

Overall, approximately 49 percent of MA-PDs that will be active and rated in 2017 earned four stars or higher, according to CMS. That’s the same percentage as last year, but up from 40 percent in 2015. Weighted by enrollment, the share of MA-PD enrollees in plans with four stars are higher is “approximately the same” from 2016 to 2017--about 71 percent last year versus about 68 percent this year, CMS said.

To David Friend, managing director of consulting firm BDO's Center of Healthcare Excellence and Innovation, said this year’s ratings show that CMS is “raising the bar” for MA plans, making it increasingly difficult to achieve higher ratings, according to CNBC.

Still, given the fact that CMS seems to be doing more “intensive” audits, Standard & Poor’s analyst Deep Banerjee told the news outlet he wouldn’t be surprised if that alters ratings in the future.

Overall Star Rating Distribution for MA-PD Contracts: 2014-2017

Source: Centers for Medicare & Medicaid Services

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