Medicare Advantage

With the filing of a proposed class action lawsuit this month, Humana Inc. became the third major insurer in recent history to be accused of using artificial intelligence to wrongfully deny patients’ care and the second insurer to face allegations specific to Medicare Advantage members. While industry experts agree that AI holds promise for improving the patient experience, it also comes with risks, and lawsuits and other regulatory actions offer a warning to insurers of all types to come up with a proper risk mitigation strategy as they increasingly deploy AI to streamline certain operations.

In the Dec. 12 complaint, which was filed in the U.S. District Court for the Western District of Kentucky, Humana MA members accuse the insurer of relying on the nH Predict AI model to make “rigid and unrealistic” projections for how long a patient will require post-acute care after an inpatient hospital stay. The AI model was developed by naviHealth, a subsidiary of UnitedHealth Group, and was the subject of a highly critical investigation published by STAT in November and subsequent lawsuit filed against UnitedHealth by the estates of two deceased MA members.

The Dept. of Justice on Dec. 15 filed a motion to transfer or dismiss Humana Inc.’s case against the federal government and its use of extrapolation in Risk Adjustment Data Validation (RADV) audits of Medicare Advantage insurers. After CMS in January finalized plans to begin extrapolating RADV audit findings in recovering improper payments starting with payment year 2018, Humana on Sept. 1 filed a lawsuit asking the U.S. District Court for the Northern District of Texas to vacate the rule and therefore stop CMS from applying its new audit policy. By excluding a “fee-for-service adjuster” that the agency had once promised would be used in the audits, the RADV audits “do not observe any actuarial standards at all,” the MA insurer argued in Humana Inc. et al v. Becerra et al (No. 4:23-cv-909-O). In its response filed in the Fort Worth division of the District Court, HHS argued that Humana hasn’t been harmed because CMS has not begun any audits under the challenged rule. Moreover, there is no certainty that Humana will be subject to audits under the new rule because CMS hasn’t “chosen the contracts to be audited under the rule for any payment year, nor selected a statistical sampling and extrapolation methodology for any such audits,” stated the response, which was obtained and posted by STAT.

Recognizing the “promise and peril” of artificial intelligence, President Joe Biden in October issued an executive order advancing a coordinated approach to ensuring the safe and responsible use of AI across multiple sectors. While HHS puts together a task force aimed at developing a regulatory action plan regarding the use of AI in health care, the White House on Dec. 14 unveiled the names of 28 payer and provider organizations committed to ensuring the safe and appropriate use of AI. Those included Medicare Advantage plan operators, such as CVS Health Corp., Allina Health (which has a cobranded PPO with CVS Health’s Aetna), Devoted Health, Geisinger, Health First (Florida), Oscar Health, Inc. and Premera Blue Cross.

While lawmakers continue to point fingers at risk adjustment and coding practices in Medicare Advantage for increasing plan payments relative to traditional fee-for-service (FFS) Medicare, a new analysis published in JAMA puts a spotlight on the “intended payment differences” created by the quartile structure currently used to set MA payment benchmarks. The Medicare Payment Advisory Commission (MedPAC) has previously recommended replacing the four-tiered system and “rebalancing” MA pay. Researchers now estimate that this system has generated an additional $46.7 billion in additional payments to MA plans, which could fuel the desire of progressive lawmakers to overhaul how MA plans are paid.

Established by the Affordable Care Act, the quartile system pays plans more for serving counties with the lowest FFS spending by applying a statutorily determined percentage to the per capita FFS estimates of spending for each county. The adjustments range from 95% for the highest-spending counties to 115% for the lowest-spending counties. Benchmarks are calculated before plans submit their bids and are also adjusted based on a plan’s Star Rating.

Nearly 32 million people were enrolled in Medicare Advantage plans as of December 2023, up from about 29.5 million in December 2022, according to AIS’s Directory of Health Plans. And while the six national carriers led by UnitedHealthcare currently enroll 69.8% of the market, regional Blues affiliates, provider-sponsored payers and other locally focused insurers have largely continued to grow alongside them. Tech-enabled startup insurers, meanwhile, saw some of the most explosive gains — and losses — in 2023. See the year-end enrollment wrap-up in the graphics below.

While major Medicare Advantage insurers are bracing for potential revenue reductions stemming from upcoming changes to the risk adjustment model, three insurers presenting at their recent investor conferences appeared bullish on the prospect of continued growth in MA, and in particular, the sizable opportunity to serve people who are dually eligible for Medicare and Medicaid. According to a recent analysis from AIS’s Directory of Health Plans, roughly 5.6 million out of an estimated 13 million dual eligibles in the U.S. are enrolled in a Dual Eligible Special Needs Plan (D-SNP).

Although managed Medicaid and the exchanges remain its No. 1 and 2 revenue drivers, Centene Corp.’s MA business — which has a large concentration of D-SNP members — will be an “important growth driver for Centene long term,” CEO Sarah London told investors on Dec. 12.

Call it the blockbuster deal that never was. The Wall Street Journal reported on Dec. 10 that The Cigna Group abandoned merger talks with Humana Inc., ending a multiweek stir over a report from the same publication that the companies were discussing a deal that would have created a $140 billion megainsurer. With the dust now settling, analysts and industry observers are speculating about what comes next for the two firms — with some suggesting that Cigna may eventually wind up back at the negotiating table.

Neither Cigna nor Humana ever officially confirmed their reported deal discussions. But on the same day that the WSJ reported Cigna was abandoning its pursuit of Humana, Cigna said its board of directors had approved an additional $10 billion in share repurchases. Cigna CEO David Cordani also issued a telling statement hinting at what might have derailed the merger talks — per the WSJ, the firms couldn’t agree on financial terms — and addressing the company’s merger and acquisition (M&A) strategy.

AHIP appointed a new president and CEO: Mike Tuffin, UnitedHealth Group’s senior vice president for external affairs. Tuffin succeeds Julie Simon Miller, who has been the health insurance trade group’s interim CEO since September, when Matt Eyles stepped down. Eyles helmed AHIP for nearly five years and said in May that his move to resign was a “personal decision.” Tuffin is no stranger to AHIP, having served as the group’s executive vice president for public affairs from 2002 to 2012. Before his role at UnitedHealth, Tuffin was managing director of APCO Worldwide’s Washington, D.C. headquarters.

If the recent activity of Humana Inc.’s private jet is any indication, The Cigna Group may have to compete with Walmart Inc. in its reported bid to combine with the Medicare Advantage-focused insurer.

That bit of corporate intrigue comes courtesy of Gordon Haskett Research Advisors, an investment brokerage that offers a service tracing the movements of major companies’ aircraft to “track possible signposts of M&A, strategic partnerships, activism, etc.”

Don Bilson, head of event-driven research at Gordon Haskett, wrote in a Dec. 1 post on X (formerly Twitter) that “Humana flew to Arkansas yesterday” — the same day the Wall Street Journal published a report, citing anonymous sources, that Cigna and Humana were discussing a deal to combine. “Could be harmless, but these two did talk in 2018,” Bilson said, referring to a WSJ report in March of that year indicating that Walmart was in “early-stage acquisition talks” with Humana. Walmart is based in Bentonville, Arkansas.

Hosting its first analyst-focused event in two years, CVS Health Corp. made a splash on Dec. 5 by introducing a pair of new drug reimbursement models, detailing its long-term margin improvement goals, and rebranding its health services segment.

Although the new pharmacy models captured the most headlines, Wall Street analysts also appeared cautiously impressed with the overall picture that CVS painted — depicting a company with ambitious goals to best its rivals in the health benefits, retail pharmacy, care delivery and health services sectors by getting its many moving parts to work together.