Featured Health Business Daily Story, Dec. 29, 2011
Reprinted from MEDICARE ADVANTAGE NEWS, biweekly news and business strategies about Medicare Advantage plans, product design, marketing, enrollment, market expansions, CMS audits, and countless federal initiatives in MA and Medicaid managed care.
A variety of factors contributed to what several plans and consultants tell MAN was a generally slower than expected 2012 Medicare Advantage Annual Election Period (AEP). Despite apparently very heavy activity near the Dec. 7 end of the AEP, many plans are likely to have fallen short of their perhaps overly ambitious goals, although there are prominent exceptions.
Some of the difficulties relate to the required earlier start — Oct. 15 — and end of AEP enrollment this time, which some seniors were unaware of until very late despite major ad campaigns from both plans and CMS itself (MAN 9/15/11, p. 1). But most of the problems, marketing experts say, stem from the lack of compelling reasons for beneficiaries already in MA products to switch plans.
The majority of MA sponsors had only small changes in benefits and premiums, and there were no mass exits of products this year — although WellPoint, Inc. did drop its troubled regional PPO in California (MAN 8/18/11, p. 3) — as there were the last two years with private-fee-for-service (PFFS) plans. Moreover, there weren’t any major sponsors under marketing and enrollment sanctions as there were in the AEP for 2011 (MAN 11/25/10, p. 1).
Even MA sponsors saying they did well in the 2012 AEP report that at least some of these factors had an impact on their results. “We started slow just like everybody else,” says, for instance, John Sowell, vice president, marketing for fast-growing Windsor Health Plan, Inc., a unit of Munich Health North America. “But we had an extremely strong close, so we will meet our sales goal for the 2012 AEP,” he told MAN Dec. 8.
Sowell says one reason the beginning of the AEP was so tough was that MA plans had to “change established consumer behavior.” Despite good efforts by CMS and plans, including Windsor itself, to let beneficiaries know the AEP was starting and ending early, “it’s not relevant till it’s upon them,’ he observes. This was a factor in phone calls showing “almost panic” by some seniors that Windsor experienced in the closing days.
Evidently this was fairly typical, so CMS late on Dec. 6 notified all MA and Part D sponsors that they had until midnight Dec. 10 to complete enrollments that were in process as of Dec. 7. CMS in its memo emphasized that the “additional flexibilities” were “only for this AEP” and that no AEP-related marketing could take place after Dec. 7 in any case.
Data from Windsor, which operates in 21 states, show the kinds of issues MA plans faced in the AEP. This year, Sowell says, the plan generated one-third less of its marketing leads in the first two weeks of the AEP versus last year, when enrollment didn’t start until Nov. 15. On the flip side, Windsor generated nearly twice the number of leads during the last two weeks this year compared with last year, when the AEP ended on Dec. 31, thanks to television commercial spots opening up and a strong public relations and direct-mail push, according to Sowell.
It was not just the earlier AEP that led to this big change, he stresses. Windsor, like other MA sponsors, was “fighting inertia” caused by the facts that there generally were not any major premium, copayment or benefit changes or service-area reductions in the AEP for 2012.
Windsor’s lead conversion figures varied substantially by MA product, he adds. Conversion rates in its HMOs, Sowell says, which are able to offer better benefits because they’re more “highly managed” than are Windsor’s other MA products, held up well, but that was less true for its PPO and PFFS offerings, which also had less favorable costs per lead.
The company was able to come out well in the end because it had “fully prepared” to move quickly in the final weeks and days to get phone calls and appointments to close MA sales, he explains. Earlier in the season, however, notes Sowell, it had to deal with marketing crowd-out stemming from the fact that “at least half” of the 30 TV markets Windsor is in “had major political spending” in October and November because of state and local elections and referendums, even though 2011 is not a major election year.
He says another complication was that direct-mail performance was “down” overall for Windsor in the AEP because the market has become “numbed” from too much and/or not-well-done DM.
Star-rating-related marketing was a factor in its markets this year, he continues. According to Sowell, Windsor’s call centers got numerous inquiries — some of them transferred from CMS’s 800-MEDICARE phone line — asking about aspects of its stars performance.
In Tennessee, its headquarters state and a major Windsor MA market, competitor HealthSpring, Inc., advertised its four-star rating.
Star ratings also were a factor for Essence Healthcare, Inc., another plan that reports doing well in the AEP (see story, p. 5). In Washington state, notes Director of Marketing Andy Shea, Essence was competing against five-star Group Health Cooperative. In its larger St. Louis market, on the other hand, Shea tells MAN, Essence’s 4.5 stars made it the highest-rated MA plan in the area, a fact it promoted aggressively, including via TV ads. The new emphasis on stars has changed “public perceptions,” he says, but it’s uncertain whether that is generating more marketing leads.
Highmark Inc. did not have to compete against any 4.5- or five-star plans — nor does it have such ratings itself — but it did face a change in the eastern part of its service area. That’s because a prime competitor, Aetna Inc., was not hampered by marketing and enrollment sanctions this AEP as it was in the last one, points out Cynthia Dellecker, senior vice president and senior markets leader. Despite that and issues related to the earlier AEP, she told MAN on Dec. 7, Highmark did “pretty well” in the AEP and is “pleased” with its results.
Dellecker concedes that Highmark’s AEP started slowly, but she says it picked up “significantly” after Thanksgiving. The company was concerned about beneficiaries not knowing about the new AEP dates this time, so it mentioned the earlier period in individual letters to members and in TV ads, she says. Nevertheless, many seniors “might have sat where they were” rather than try to change Medicare plans this year, Dellecker adds.
The lack of a major factor such as plan exits or large premium and benefit changes, she acknowledges, could have been a factor in this since seniors “don’t move” readily when costs are stable. And Blues plan licensee Highmark is aided in such an environment by its “Blue message,” she contends.
But MA plans needed a lot more than a good brand to do well in this AEP. It has been a slow season for plan switches across the entire MA client base of marketing firm KBMG Health Services, which works with about 20 plans, says Peter Rodes, vice president, strategy and consulting. Rodes, speaking two days before the end of the AEP, cited to MAN factors such as “a period of price stability” and the relative lack of PFFS exits or “a plan imploding” this year, compared with the situation last year. There didn’t seem to be any geographic differences in the relative lack of activity, he adds.
On the other hand, he says, MA firms were able to benefit in the AEP from the relative weakness of Medicare supplement plans, which have suffered because of high and rising premiums in a bad economy. This has spurred switches from Medigap to MA, he maintains. However, the environment still was tough for MA plans, which have been cutting back on use of outside sales agents and, even if they were converting a previously “superstar” 20% of leads before, are finding that now “you got to do better.”
Marketing compliance was another inhibiting factor, says Paul Sharon, national marketing director for field marketing organization (FMO) Premier Senior Marketing. He tells MAN that compliance concerns were making MA firms “go slower” this AEP, thus making it more difficult to get a strong return on investment in marketing.
Also hindering performance in the AEP was that some MA plans simply weren’t fully prepared for its earlier start this year, according to Gorman Health Group, LLC President Jeff Fox. That led to a slow start, he said in a Dec. 5 conference call with investors sponsored by Citigroup Global Markets, and FMOs told him there hadn’t been a lot of pickup since Thanksgiving as expected. He noted that a substantial increase this AEP in online enrollment (several others confirmed this to MAN) will help. But most MA sponsors overall are missing their enrollment targets, he added.
On Dec. 15, Gorman Health Group’s Jeff Fox led a post-mortem on what happened this fall and why. Click here to learn more about the AIS webinar Medicare Advantage and Part D: Lessons Learned From 2012 Annual Election Period Results — and listen On-Demand or order a CD.