Insurance Lobby Blasts Medicare Advantage Audit Rule

Dive Brief:

  • The AHIP insurance lobby blasted the Biden administration for finalizing a rule that seeks to claw back millions of dollars from health insurers through Medicare Advantage audits that will apply retroactively to payments beginning in 2018.
  • AHIP called the final rule “unlawful” and “fatally flawed” in a Monday statement following the rule’s release.
  • The lobby did not say whether it plans to sue the administration over the rule when asked by Healthcare Dive.“Our view remains unchanged: This rule is unlawful and fatally flawed, and it should have been withdrawn instead of finalized,” AHIP CEO Matt Eyles said in a statement.

Dive Insight:

Federal regulators are seeking to crack down on alleged overpayments made to Medicare Advantage insurers.

The program has faced criticism in the past for alleged payment abuses tied to the so-called risk-adjusted payments sent to health insurers.

Medicare Advantage plans, run by private insurers, are paid capitated rates to provide health coverage to millions of seniors and people with disabilities. The plans also receive what are called risk-adjusted payments designed to raise payments to cover for sicker members.

The HHS Office of Inspector General, which serves as a watchdog over the program, has alleged that plans attempt to “game the system” by finding ways to boost member risk scores. The higher the risk scores, the higher the risk-adjusted payment to plans.

Following the rule release, one analyst said the final rule is “likely better than feared,” according to a research note from Whit Mayo, senior managing director and senior research analyst at SVB Securities.

The CMS ultimately chose to recapture payments starting in 2018. It initially proposed going back even further to obtain alleged overpayments beginning in 2011.

Mayo said it’s “not a great outcome” but might be better than the initial proposal. Assuming the overpayments are spread equally over the carriers, Humana faces the largest earnings per share headwind, Mayo said.

Gary Taylor, managing director and senior equity research analyst, said insurers have previously hinted that they may bring a legal challenge against the rule, which could tie up the proposal in courts for a prolonged period and may prevent the collection of the alleged overpayments.

“On a go-forward basis, incentives are changed,” David Windley, managing director and senior equity research analyst at Jefferies, said in a note.

UnitedHealthcare is the largest Medicare Advantage insurer by the number of enrollees, according to the Kaiser Family Foundation’s analysis of 2022.

UnitedHealthcare and Humana covered nearly half of all Medicare Advantage enrollees in 2022.The other largest MA plans by enrollment include Blue Cross and Blue Shield plans, CVS Health’s Aetna, Kaiser Permanente and Centene.


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