Medicare Advantage participants are advised to carefully examine their coverage options during the upcoming open enrollment period, commencing on Tuesday. This is crucial to avoid unexpected changes in the following year. Despite the overall stability of this rapidly expanding market, insurers are implementing numerous alterations that could lead to some seniors needing to find new policies, incurring higher out-of-pocket expenses, or receiving reduced additional benefits.

"The current year has witnessed the most significant disruption in benefits within the market in recent times," remarked Lindsay Knable, a partner at Oliver Wyman's health and life sciences division. These changes coincide with the anticipated Medicare Advantage enrollment reaching 35.7 million, accounting for 51% of the total Medicare enrollment. The Medicare Advantage program, an alternative to traditional Medicare, involves the federal government contracting with private insurers to offer coverage to beneficiaries, many of whom are highly cost-conscious due to their fixed incomes.

However, a small fraction of enrollees take advantage of the open enrollment period, which lasts until December 7th. According to a recent analysis by the Kaiser Family Foundation (KFF), a health policy research organization, nearly two-thirds of Medicare Advantage participants did not compare their coverage with other options for 2022. Jeannie Fuglesten Biniek, an associate director at KFF's Program on Medicare Policy, suggests that enrollees should review their annual notice of change to understand what might differ for 2025. "It's imperative for individuals to pay close attention to fully comprehend what they are enrolling in," she emphasized.

This year, over 1.8 million Medicare Advantage members, approximately 8% of those in non-group, non-special needs plans, are enrolled in policies that will not be available in 2025, as per an analysis by Oliver Wyman. Around 1.3 million of these individuals are currently in $0 premium plans and will need to actively choose new plans, or they will be automatically placed in traditional Medicare. In contrast, for 2024, roughly 230,000 members, or about 1%, faced a similar situation.

Humana and Aetna are leading the way in reducing their offerings, with about 10% of their members affected by these changes, according to David Windley, a senior equity analyst at Jefferies. Approximately 5% of enrollees in UnitedHealthcare and Centene policies will also be impacted. Nevertheless, nearly all seniors will have a plethora of alternative options to consider. On average, they will have access to 34 Medicare Advantage plans with drug coverage in their county for 2025, a slight decrease from 36 this year, as reported by the Centers for Medicare and Medicaid Services.

"The offerings remain stable, and individuals will continue to have a wide range of affordable choices in both Medicare Advantage and the Part D drug plan markets," stated Dr. Meena Seshamani, director of the Center for Medicare, in a press briefing last month. Moreover, the average monthly plan premium is expected to decrease to $17 next year, a reduction of $1.23 from this year's rate, according to the agency. Approximately 60% of enrollees who stay with their current plan will enjoy a $0 premium in 2025, and the majority of members will see the same or lower premiums next year if they maintain their current plan.

Although Aetna is discontinuing some plans, it will still offer policies accessible to 59 million Medicare-eligible beneficiaries, as noted by David Whitrap, a spokesperson for the insurer. The company will expand its offerings to 76 new counties next year. "For 2025, Aetna is investing in markets where we can deliver competitive, high-quality, and affordable benefits in a way that is sustainable for our business," he explained in an email.

Seniors will also need to verify if they will face increased out-of-pocket costs next year, particularly for medications. This year, over 16 million enrollees are in plans without any deductible for any drug, according to Greg Berger, a partner at Oliver Wyman. However, in 2025, more than 45% of these members will be subject to a deductible for at least some drugs, especially brand-name or specialty medications, if they remain in the same plan. Approximately 36% of enrollees in Medicare Advantage with prescription drug coverage are in plans for which the drug deductibles will increase by at least $200, as per Jefferies. Those enrolled with UnitedHealthcare and Aetna are most likely to encounter higher deductibles.

Some insurers are also reducing their coverage for dental, hearing, and vision benefits. For example, Aetna is cutting its allowance by over $1,700 a year, on average, in its top 20 plans, while UnitedHealthcare is reducing it by just over $750 a year, on average, as reported by Windley. Similarly, Centene, Aetna, and Humana are trimming their benefits that assist seniors in paying for over-the-counter medicine and providing flexible spending cards, which can be used for other health-related expenses.

While many seniors focus on premiums when reviewing their options, they should also consider the other benefits and features of their Medicare Advantage choices, according to Mary Beth Donahue, CEO of Better Medicare Alliance, a Medicare Advantage advocacy and research group funded by insurers. "Seniors and those guiding them through this process—the caregivers, family, and aging organizations—must really look at the full picture," she advised.

The changes are a result of various legislative and regulatory modifications to the Medicare Advantage program in recent years, as well as an increase in enrollees' utilization of healthcare services. Critics have long argued that Medicare Advantage insurers are overpaid for the care and services they provide, claiming that many insurers designate some enrollees as sicker than similar health status individuals in traditional Medicare to obtain higher payments from the federal government.

Over the past few years, the Biden administration has made several adjustments to the Medicare Advantage payment system, particularly concerning the health status of enrollees and the quality rating of the plans—both of which influence the overall payments that insurers receive. Additionally, some Covid-19 pandemic-era provisions that temporarily boosted the quality grade of the insurers' plans have expired. Consequently, while the Centers for Medicare and Medicaid Services has increased the rates, insurers argue that the payments are insufficient to cover their medical costs.

Furthermore, Congress made significant changes to Medicare's drug benefit as part of the 2022 Inflation Reduction Act, which Democrats pushed through both chambers. One of the most notable provisions is an annual $2,000 cap on Medicare enrollees' out-of-pocket prescription costs, set to begin in January. However, the law requires insurers to cover more of the costs once enrollees reach the catastrophic coverage phase above the cap. To help manage their increased liability from the revamped drug benefit, some insurers are raising their deductibles and implementing other changes to their drug coverage.

"You have changes impacting revenues in many different ways," Knable said. "That's prompting insurers to reevaluate what their product portfolios look like."