By Brett Arends

Turmoil in the privatized version of Medicare

Health-insurance giant Humana is dropping a staggering 550,000 of its less profitable Medicare Advantage customers, or about 10% of the total, this year as it tries to restore its stock price and its profits.

“We now anticipate full year Individual MA membership losses of approximately 550,000, inclusive of plan and county exits,” Chief Executive Jim Rechtin told investors in a statement to coincide with the company’s quarterly earnings report.

“We’re shedding unprofitable plans, we’re resetting expectations and lower margin plans, and we are shifting our membership mix with a focus on sustainable long-term value,” he then explained to analysts during a conference call. “The membership losses that we’ve experienced have largely been consistent with our strategy.”

Humana (HUM) won’t be alone in cutting back on its Medicare Advantage offerings. Other insurers, including CVS (CVS) and Centene (CNC), have also warned that they are cutting back on lower-profit or no-profit customers in the troubled program.

Humana’s news comes in the middle of Medicare Advantage’s annual open enrollment period, which runs from Jan. 1 to March 31 each year and during which customers are free to switch plans.

Read: Unhappy with your Medicare Advantage? You have one more chance to change your mind.

The cuts will mean turmoil and confusion for many beneficiaries, as well as the risk of higher premiums, fewer benefits or both.

But there may be a silver lining. Many of those losing their Medicare Advantage plans may also get a rare and valuable chance at a do-over, allowing them to join traditional government-run Medicare instead and get supplemental Medigap coverage at beneficial regulated rates.

“It really depends on the circumstances,” says Meredith Freed, a senior policy manager at the health policy nonprofit KFF and an expert in Medicare.

Broadly speaking, she says, if your Medicare Advantage insurer – whether that’s Humana or any other company – quits your county completely or drops your plan and stops offering any other plans that are similar to yours, then you may be eligible for what is known as a “guaranteed issue right.” That effectively means that you could join traditional, government-run Medicare under pretty much the same terms that were available when you turned 65.

On the other hand, if your Medicare Advantage insurer stays in your county and automatically transfers you to a similar plan – from one health-management organization plan to another HMO plan, for example – you may not have that option, Freed says.

Keep in mind, Medigap plans are regulated by the states, not the federal government, meaning you may get extra eligibility options depending on where you live.

“The people affected by this move should be getting a letter [from the insurer] saying whether they’re being assigned to another plan or not,” she says.

This option may matter to many people. Traditional, or original, Medicare – under which you are insured by the federal government – typically pays for 80% of your medical costs. Most people on the program pay for a private insurance plan, known variously as a supplemental or Medigap plan, to cover the other 20%.

When you first qualify for Medicare at age 65, you have a six-month window during which you can buy Medigap plans under favorable conditions. Insurers who offer such plans have to offer them to everyone who is eligible, under strict regulations.

But it’s a one-time deal. If you don’t take up the offer and instead opt to go with a fully privatized Medicare Advantage plan, the window closes. Generally speaking, if, in the years ahead, you want to switch from Medicare Advantage to the government plan, you won’t have any guarantees when it comes to finding a Medigap plan. You may have to pay through the nose – that is, if you can get a plan at all.

But plan closures like those being announced now offer a rare chance. In many cases, says Freed, that Medigap window may reopen if you want to move to traditional Medicare.

The Centers for Medicare and Medicaid Services, the government department that runs Medicare, did not respond to a request for comment.

The latest turmoil again raises the question of whether most of us are better off simply sticking with traditional government-run Medicare instead of putting ourselves at the mercy of a private company whose executives, and stockholders, have interests that are different from our own. For years the insurers have argued that Medicare Advantage was a “win-win-win” for customers, stockholders and taxpayers. But the Medicare Payment Advisory Commission, the panel of medical experts that advises the government on the program, pointed out last year that there was a simple reason Medicare Advantage programs could apparently offer customers a better deal: It was billing taxpayers an extra $83 billion a year.

“Medicare Advantage plans are facing an extended period of reckoning,” says Philip Moeller, the author of a book titled “Get What’s Yours for Medicare: Maximize Your Coverage, Minimize Your Costs.” The insurers, he said, have been on a “gravy train for years.”

As customers have just been reminded, a private insurance company with stockholders has to keep them happy.

Meanwhile, it says something that when the nonprofit Commonwealth Fund spoke to Medicare Advantage brokers themselves, many said that they personally intended to stick with the government plan.

-Brett Arends

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

  (END) Dow Jones Newswires

  02-15-25 1116ET
Copyright (c) 2025 Dow Jones & Company, Inc.