Disruption hitting Medicare for 2025

Carriers in the Medicare space saw a number of disruptions as changes to the program take effect for 2025, said Dan Mangus, vice president of sales with Senior Marketing Specialists.

Mangus described the changing face of Medicare during the National Association of Insurance and Financial Advisors’ Peak 65 Impact Day.

Carriers already knew they were facing serious challenges when open enrollment began in October, Mangus said.

“We are hitting the crest of the Silver Tsunami, with the first wave of baby boomers hitting age 78 this year,” he said. “This is putting a strain on carriers, the government and individuals alike.”

In addition, two curveballs hit the Medicare front earlier this year. One was a final rule issued by the Centers for Medicare and Medicaid Services that changes agent compensation. Implementation of that rule was delayed by litigation over the summer. The second was a data breach against a CMS contractor that impacted more than 1 million Medicare beneficiaries, requiring new Medicare numbers to be issued to them.

Carriers 'face major hurdles'

“Carriers faced major hurdles – inflation, increased claims losses, utilization is up, the cost of drug plan financing under the Inflation Reduction Act, the cost of treatment and technology, the cost of midyear reporting for plans, coding changes,” he said. “The most significant is the impact of the IRA on prescription drug costs.”

Mangus said 90% of Medicare Advantage beneficiaries received notices stating that their benefits will be less than they were last year, and 1.5 million were notified their plan would not be available for 2025.

Carriers responded to these hurdles and disruptions by renegotiating contracts with providers, eliminating or reducing nonessential benefits, reducing the marketing of some plans and removing some agent commissions, he said.

The IRA established a $2,000 annual out-of-pocket maximum for those in Medicare Part D prescription drug plans. Although this may save some beneficiaries money, “it creates a huge cost for the carrier,” Mangus said.

Medicare supplement plans are not immune to disruption, Mangus said. MedSupp carriers cannot control their loss ratios, and they are subject to Medicare utilization and inflation. “The only way to put a brake on all this is to increase premiums,” he said.

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Susan Rupe is editor in chief, magazine, for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected].