Local markets for Medicare Advantage (MA) plans are almost always dominated by a couple of insurers, according to analysis by KFF. In 44 percent of counties, one insurer covered a majority of MA enrollees, and in 90 percent of counties, two insurers combined to cover a majority. More often than not, at least one of these two insurers is UnitedHealthcare, which leads enrollment in 41 percent of counties, or Humana, which leads in 25 percent. An uncompetitive insurance market can undermine many of the supposed benefits of privatized Medicare, as payers have less incentive to compete on costs and benefits for a pool of consumers who lack quality alternative choices of plans. Despite these theoretical problems with highly uncompetitive markets, MA plans have delivered continuously lower premiums and better supplemental benefits to enrollees, at the expense of narrower networks for enrollees and greater per-enrollee spending than traditional Medicare. One explanation for this trend is that the primary competitor for a UnitedHealth MA plan is not a Humana MA plan but rather traditional Medicare coverage.

We discussed last week how MA carriers have marketed cost-sharing protections and supplemental benefits to fuel MA’s explosive enrollment growth. However, a new strategy appears to be taking hold. As reported in the Wall Street Journal, insurers like CVS and Humana are starting to scale back MA benefits, and “Wall Street is cheering them on.” Their stocks rose, and their earnings beat expectations even as Humana projected a 500K loss in MA membership. In contrast, UnitedHealthcare expanded its MA rolls this year resulting in a “disappointing” financial performance, so it plans to raise prices and rollback benefits next year.