Part D Sponsors Are Still Optimistic About Future

Despite Part D Enrollment Drop in 4Q10, Sponsors Are Still Optimistic About Future

Reprinted from MEDICARE PART D NEWS, monthly business, compliance and management news and strategies to help Part D plans increase enrollment, boost revenues and minimize their risks of CMS fines, penalties and repayments.

By Barbra Golub, Editor

While CMS showed an increase in year-to-date enrollment in Part D products as of Jan. 14, 2011, some Part D sponsors said they lost Part D enrollees for the fourth quarter of 2010. And although the new Open Disenrollment Period for Medicare Advantage enrollees didn’t seem to produce big gains for Part D, many sponsors were encouraged about the outlook for 2011 and beyond.

Year-to-date enrollment for Part D products as of Jan. 14, 2011 was 29,161,903, an increase from the Sept. 10, 2010, level of 28,161,123. This breaks down to enrollment in stand-alone prescription drug plans (PDPs) of 18,520,771, up from 17,889,642, and Medicare Advantage prescription drug (MA-PD) plan enrollment of 10,425,312, up from 10,043,666.

Despite this increase, Humana Inc. on Feb. 7 said it had a slight decrease in PDP membership in the fourth quarter of 2010, from 1,785,600 on Sept. 30 to 1,758,800 on Dec. 31, 2010. PDP premiums of $461.2 million in the fourth quarter dropped 10% compared with $514.8 million for the year-ago period, reflecting the combined impacts of a 2% decrease in premiums per member per month and a 9% decline in average membership year over year.

Membership in Aetna Inc.’s PDP products went down from 622,000 in September to 608,000 in December 2010, the company said on Feb. 4. It added that membership in its MA-PD products declined during this period, from 231,000 to 227,000.

Aetna attributed the drop partly to CMS sanctions imposed on the company in April 2010. The agency suspended Aetna’s ability to market to and enroll new members in its MA and PDP products for allegedly failing to ensure the availability of Part D drugs when transitioning beneficiaries into new plans or onto new formularies (PDN 5/10, p. 1). However, during a conference call to discuss fourth-quarter earnings, Aetna said CMS granted an extension of the limited waiver of these sanctions, allowing it to continue to enroll members into existing group plans through March 31, 2011.

Aetna also faces CMS-imposed civil monetary penalties in 2011 for allegedly failing to provide enrollees with accurate information to beneficiaries in its contract year 2010 Evidence of Coverage (EOC) documents (see story, p. 7).

On Feb. 1, Health Net, Inc. said membership in its Part D plans was 427,000 at the end of the fourth quarter of 2010, a 7.2% decrease compared with the end of the fourth quarter of 2009, but in line with the company’s expectations.

And WellPoint, Inc. said on Jan. 26 that the operating gain in its senior business decreased primarily due to a decline in Part D membership and the reduction in federal reimbursement rates for the MA program. Specifically, membership fell 17% to 1.25 million on Dec. 31, 2010, from 1.5 million on the same day in 2009. The number did rise slightly (1.1%) from the Sept. 30, 2010 level of 1.23 million.

Plans See Good Things for 2011

One company that did relatively well in Part D membership for the fourth quarter of 2010 was UnitedHealth Group Inc. It said Jan. 20 that it boosted PDP membership 5% or 230,000 members last year to 4.5 million enrollees on Dec. 31, 2010.

Due to this “strong market response” in 2010, UnitedHealthcare Medicare Solutions CEO Tom Paul said that UnitedHealth now expects “our PDP…performance would be positive” in 2011.

Humana is also optimistic about 2011, particularly for its new Humana-Walmart Part D plan (PDN 11/10, p. 1). During its fourth-quarter 2010 earnings call Feb. 7, the company said PDP membership grew in January to almost 2.4 million, an increase of more than 630,000 members from Dec. 31, 2010. It attributed the increase to higher-than-expected sales of its products, including the Humana-Walmart plan.

Although Humana doesn’t have exact figures for sales of the new plan, COO James Murray said that “the opportunity to be in 3,000 Walmart locations throughout the United States and having an opportunity to talk with seniors in terms of their needs and talk to them about not only the Walmart plan but also whether or not there’s other kinds of products that would better suit their needs likely contributed nicely to the improved enrollment that we experienced.”

Humana is “very, very pleased with the way the Walmart plan looks in its first six weeks,” maintained Murray. He explained that the company had looked at risk scores, prescriptions per member per month, generic dispensing rates, member risk share and utilization of mail order, which is one of the reasons Humana wanted to make the deal with Walmart.

CVS Caremark Corp. is also predicting positive growth for its Part D product line in 2011 and 2012. According to David Denton, CVS’s executive vice president, the acquisition of Universal American is expected to add approximately $900 million to top-line growth in 2011 (PDN 2/11, p. 1).

CVS President and COO Larry Merlo predicted during the organization’s fourth-quarter 2010 earnings call on Feb. 3 that the acquisition will contribute to its continued growth in both specialty and Part D business. “We’re focused on driving top-line growth in the PBM through continued market share gains and strong client retention, a keen focus on those high-growth sectors, specialty and Med D businesses, as well as identifying additional opportunities for high return bolt-on acquisitions.”

Denton clarified that CVS assumes the deal will close late in the second quarter of 2011, so financial results from Universal’s Part D business would start showing up in the third quarter of 2011. “The profitability of the [Part D] business is generally back-end loaded...[and is] more profitable later in the year than in the beginning,” he said. He added that CVS had a very productive selling season for 2011. The members acquired from Universal will just add to it, said Denton.

According to Per Lofberg, president of CVS’s PBM business, CVS Caremark had approximately 1.2 million lives before the Universal deal, representing between 10% and 15% of PBM revenue. With the addition of the Universal lives, it will increase to about 3.4 million.

Denton didn’t give much credence to critics who said CVS was taking on too much risk with the acquisition. The organization already has in place an infrastructure with its current Part D products, he contended. Combining that with the infrastructure from CVS’s PBM business that services those Part D lives, “we have the infrastructure in place to very productively add additional lives into that asset base without incurring a substantial amount of incremental capital,” he said.

Moreover, he asserted that the government already adds “risk insurance…on top of that business.”