Medicare Advantage Premiums Decline as Enrollment Rises

Medicare Advantage plans have 9.4 percent higher enrollment than a year earlier and fees that are 7.2 percent lower, according to a U.S. official who credited the 2010 health-care law for the gains.

In Medicare Advantage, people over age 65 get expanded coverage beyond the standard federal program from private insurers including UnitedHealth Group Inc. (UNH) and Humana Inc (HUM) that are subsidized by the government.

The enrollment rise to 12.8 million exceeded Medicare projections in May that membership would peak at 12.5 million in 2012 before falling to about 9.2 million by 2018 as cuts kick in on federal subsidies to insurers. The average premiums dropped to $31.54 per month, the U.S. Department of Health and Human Services said in a statement.

“Not only are average premiums lower, but plans are better,” said Marilyn Tavenner, acting administrator of the Centers for Medicare and Medicaid Services, in a statement. The health-care overhaul is “motivating plans to improve the quality of their coverage,” she said.

Democrats have long charged that subsidies for Advantage plans are excessive, and the health-care overhaul cut their payments by $136 billion over a decade, starting in 2013.

“We continue to see more plans seek to enter the market,” said Jonathan Blum, deputy director of CMS, in a conference call with reporters. “We continue to see plans lower their prices. We’re confident that the program will continue to grow over the next several years.”

Out-of-Pocket Costs

Robert Zirkelbach, a spokesman for America’s Health Insurance Plans, a trade group in Washington, wrote in an e-mail that plan members will face “higher out-of-pocket costs, reduced benefits and fewer health-care choices” as the health law’s payment cuts accelerate.

The business will probably continue to grow despite the cuts, said Les Funtleyder, an analyst at Miller Tabak & Co. in New York who owns shares of Humana. Baby Boomers now entering the Medicare market are more comfortable with managed-care plans than older people, he said in a telephone interview.

“It’s a generational thing,” Funtleyder. “Making money on that population is a different story.”

Large plans like Humana probably will be more successful than smaller plans because their scale gives them an edge at managing the actuarial risk of insuring older people, he said.

There were about 48 million people enrolled in Medicare in 2011, according to the Kaiser Family Foundation, a Menlo Park, Calif. nonprofit.

To contact the reporter on this story: Alex Wayne in Washington at awayne3@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net

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