Enrollment considerations for new Medicare Advantage organizations

Enrollment growth is one of the most important considerations in the early years of a startup Medicare Advantage (MA) organization (MAO). Enrollment affects an MAO’s revenue and profitability and is a key driver to becoming successful. For these reasons, enrollment projections are a critical component of a new MAO’s financial pro forma. However, enrollment assumptions are difficult to develop, especially for a new MAO without any prior experience.

To better inform enrollment expectations for new MAOs, Milliman’s Kelly Backes and Julia Friedman analyzed historical enrollment experience for parent organizations new to the MA market from 2007 to 2018. They summarized results annually from an MAO’s initial startup year to its seventh year of operations (where available) and segmented this experience by population type and size.

They found:

  1. Enrollment increased with maturity, but varied widely.
  2. General enrollment organizations achieved the largest initial enrollment.
  3. Small organizations achieved significant growth with maturity.

To read more of their findings, read their article here.

The political landscape and UK private medical insurance (PMI)

Before we consider the impact of potential changes in regulation for the PMI industry, we review the manifestos of six parties for their views on the UK healthcare system and consider the implications for the UK PMI industry. The commentary around healthcare is fairly high-level in all manifestos. We present the sound bites for context and interest, along with our thoughts on what this may mean for the UK PMI industry, in the table below.

Political Party Manifesto ClaimsPotential Implications for UK PMI
Labour Party1
‘Labour will protect our public services, like the NHS, from being opened up to further privatisation.’– A Labour Party government could mean increased taxes and fewer opportunities for the National Health Service (NHS) to collaborate with the private healthcare sector.


– Though not explicitly written in the Labour manifesto, Jeremy Corbyn has made a number of claims on increasing funding for the NHS through various methods, including raising the insurance premium tax. This could directly increase premiums and reduce demand for PMI products.

– It seems unlikely that pilot programmes to use private sector hospital capacity for NHS patients will be expanded, meaning a lost source of revenue for private hospitals. This will further lower private hospital occupancy rates and may lead to increased tariff rates for insurers.

Conservatives/Tory Party2
‘We will increase NHS spending by a minimum of £8 billion in real terms over the next five years.’– The perception of increased spending on the NHS will likely result in reduced demand for PMI products, even if the increased spending is wholly insufficient to create more capacity in the context of an expanding and ageing population. The King’s Fund has suggested that a real-term funding increase of approximately £30 billion a year is needed over the next five years to maintain current services3, much more than the £8 billion promised in the Conservatives/Tory manifesto, as well as the £20 billion a year promised by Theresa May in the budget speech last year4.
‘We will ensure that the NHS and social care system have the nurses, midwives, doctors, carers and other health professionals that it needs…Last year we announced an increase in the number of students in medical training of 1,500 a year; we will continue this investment, doing something the NHS has never done before, and train the doctors our hospitals and surgeries need.’– The BBC reports that 1,500 additional students a year is potentially not enough to meet the growing demand, and replace all those who may be quitting or retiring from the NHS5.


– In 2018 it was reported that an additional 3,000 places on midwifery training courses will be created over the next four years, but there were concerns on whether this would be enough to guarantee that the midwife workforce would grow6. With numbers leaving the NHS reaching 8,900 over a period of five years, the increases that are proposed may still fall short of that required by the NHS to meet growing demands.

‘We will ensure that the NHS has the buildings and technology it needs to deliver care properly and efficiently.’– If more NHS buildings and facilities are created, the use of private medical facilities by the NHS will reduce. This will take a number of years to create though and, given the lack of ring-fenced funding for this development, seems unlikely to be achieved due to other competing priorities.
‘For a country to remain stable, an economy to be strong, a society to stay healthy, we need a partnership between the individual and the wider nation, between private sector and public service, and the strong leadership only government can provide.’– The Tory party is more open towards people using the private sector, though it does not speak specifically about the healthcare system. It is less likely to suggest the use of policies that would directly harm the PMI industry. It is not clear exactly what role it expects the private sector to play in healthcare from the vague manifesto statement.
Brexit Party
No manifesto, but a quote from Nigel Farage: ‘We need to move to an insurance-based system of healthcare.’– A host of possibilities exist depending on the type of insurance system proposed and accepted by parliament. Options include a social insurance scheme, mandatory private insurance scheme or a hybrid model.


– Even in a fully insurance-based system, the government may decide to retain some responsibility for providing healthcare, in which case private healthcare facilities may compete alongside public facilities for insurance reimbursement. This will increase utilisation and limit cost inflation among private healthcare facilities.

– Any insurance plan (social or private) would have to have a defined set of benefits which may be substantially more limited than today. This may encourage the development of complementary and/or supplementary insurance products. This could vastly transform and expand the PMI market. However, our experience from other social insurance schemes is that the benefit package is constantly under pressure due to budget constraints and resetting the benefit package each year is a highly political process.

– Private insurers could redefine their roles as third-party administrators for social insurance schemes, even if they were not taking on any insurance risk directly.

Liberal Democrats7
The Liberal Democrat manifesto is solely focused on remaining within the EU and includes a host of reasons for this, including noting the contributions the EU makes towards healthcare and pharmacy within the UK. Some areas highlighted in the manifesto:


‘The EU also makes it easier for people such as doctors, nurses, vets and architects to work abroad by ensuring that their qualifications are recognised across Europe.’

‘The EU funds research into new treatments for diseases and gives the UK access to cutting-edge treatments at the earliest opportunity.’

– Leaving the EU could cause the prices of certain treatment options and drugs that are accessed from the EU market to increase if there are additional levies or taxes added.


– Under a Liberal Democrat rule, and if Brexit is cancelled, the PMI industry should largely remain similar to the status quo, based on the current pledges within the Liberal/Democrats manifesto. This does not however mean they would not introduce policies that could impact the PMI industry in the future.

Independent Group for Change (previously Change UK8)
Similar to Liberal Democrats, the Independent Group for Change Party is focused on the benefits of remaining within the EU: ‘Brexit will be a disaster for our hospitals, science and research, social care and public health. It will be bad for our health workforce – if they leave the UK, patients and those who are dependent on care will bear the brunt. It will be bad for getting the medicines we need, which have a short shelf-life and which we risk losing if we leave the EU without a deal.’– Like the Liberal Democrats the preference is to remain within the EU, indicating the PMI industry would likely remain similar to the status quo.
Green Party9
‘Roll back privatisation of the NHS to ensure that all health and dental services are always publicly provided and funded, and free at the point of access, via the introduction of an NHS Reinstatement Act. Scrap NHS Sustainability and Transformation Plans.’


And ‘Close the NHS spending gap and provide an immediate cash injection, to ensure everyone can access a GP, hospitals can run properly, and staff are fairly paid.’

– The use of private healthcare providers for NHS-funded admissions would be expected to reduce or potentially end. It is not clear how the increased public provision will be funded, particularly in some areas where there is heavy private provision of NHS-funded services, such as psychiatry.


– Expanding NHS coverage for all health and dental services may dramatically reduce the requirements for some health insurance. The general perception of increased NHS services would deter people from buying PMI and cash plans or encourage existing customers to lapse their policies.

– Under a properly funded NHS many services that are currently paid for by the user, such as dental and optical, would be provided for free. This would likely impact the cash plan market, reducing demand for these products.

– It is not at all clear which funding gap is being referred to, or the cost of this pledge, but it’s likely to be substantial.

‘Major investment in social care for the elderly and all those who need it.’– This suggestion is likely to reduce the current pressure on NHS services, but it does not have obvious implications for PMI.

We expected more detailed and explicit views towards healthcare in the manifestos and ultimately it is difficult to determine the likely steps each party would take if they have the power to action their pledges. For many parties Brexit remains the main focus, with little thought or attention to healthcare within their manifestos.

Over the coming weeks we will keep a close eye on the campaigns of Boris Johnson and Jeremy Hunt for updates and changes in statements relating to healthcare and the PMI industry, following up with our findings in our forthcoming blogs.

Our next blog looks at the impact of potential changes in regulation following Brexit for the PMI industry. Please see our previous blogs on the impact of changes in the market size and medical inflation on the PMI industry.


1See the Labour Party Manifesto at http://labour.org.uk/wp-content/uploads/2019/05/Transforming-Britain-and-Europe-for-the-many-not-the-few.pdf.
2See the Conservatives/Tory Party Manifesto at https://www.conservatives.com/manifesto.
3The King’s Fund (6 June 2017). Call to strengthen NHS finances: Letter to the editor. Retrieved 25 June 2019 from https://www.kingsfund.org.uk/publications/articles/call-strengthen-nhs-finances.
4Triggle, N. (17 June 2018). NHS funding: Theresa May unveils £20bn boost. BBC News. Retrieved 25 June 2019 from https://www.bbc.com/news/health-44495598.
5 BBC News (25 March 2018). NHS: Over 3,000 more midwifery training places offered. Retrieved 25 June 2019 from https://www.bbc.com/news/health-43529877.
6 Ibid.
7 See the Liberal Democratic Manifesto at https://d3n8a8pro7vhmx.cloudfront.net/libdems/pages/45093/attachments/original/1557342873/Liberal_Democrat_European_Election_Manifesto_2019.pdf?1557342873 .
8See the Change UK Manifesto at https://voteforchange.uk/wp-content/uploads/2019/05/Change-UK-Charter-for-Remain.pdf.
7See the Green Party Manifesto at https://www.greenparty.org.uk/green-guarantee/our-nhs-and-public-services.html.

Guidance for Medicaid managed care MLR calculations

In May 2019, the Centers for Medicare and Medicaid Services (CMS) released an Informational Bulletin clarifying how payments to subcontracted vendors should be accounted for in the medical loss ratio (MLR) calculation required by 42 CFR §438.8 as established by the Medicaid and Children’s Health Insurance Program (CHIP) managed care final rule published in May 2016. In the May 2019 bulletin, CMS focuses on the responsibilities of a subcontractor in providing data and the proper accounting of subcontractor payments for purposes of MLR reporting. The provisions outlined in the May 2019 bulletin apply to all subcontractor relationships, but CMS specifically highlights pharmacy benefit manager (PBM) arrangements that may include “spread pricing” and rebate retention.

The final rule requires states to complete MLR reporting for the first contract period beginning on or after July 1, 2017. It is anticipated that many state Medicaid programs will be providing MLR data for CMS for the first reporting period during calendar year 2019, so states should clearly articulate this guidance to contracted managed care plans and modify data collection processes and vehicles to collect the necessary detail to meet CMS requirements.

The final rule also stipulates that a managed care plan must ensure that its subcontractors fully comply with all terms and conditions of its contract with a state and must comply with all applicable Medicaid law and regulations. One area in which managed care plans commonly use subcontractors is in the delivery of pharmacy benefits. PBMs maintain and develop pharmacy networks, negotiate rebates with drug manufacturers, and perform other activities that support managed care plans’ obligations under contracts with states. In this paper, Milliman’s Paul Houchens, Ian McCulla, and Amber Kerstiens discuss reporting requirements for PBMs and other third-party vendors under this new CMS guidance.

How will changes to Medicare Part D risk score model affect health plans?

In April, the Centers for Medicare and Medicaid Services (CMS) released details for the 2020 Medicare Part D pharmacy hierarchical condition categories (RxHCC) risk score model. The model change will affect health plans differently based on demographics and other factors. Overall the model change increased low-income risk scores and decreased non-low-income risk scores.

In this paper, Milliman’s Adrian Clark and David Koenig summarize the changes in member risk scores resulting from the risk score model update. They also quantify the model change using three separate metrics: the change to the model coefficients, the overall change in risk score for a nationwide population by key enrollee characteristics, and the change to the normalization factor.

Employer stop-loss market considerations for health plans

Over the past decade, submitted financial filings suggest the employer stop-loss (ESL) market has nearly tripled, growing from roughly $7 billion in premium in 2008 to over $21 billion in 2018. As this growth has occurred, a significant share of it has accrued to health plans rather than traditional ESL carriers. While there can be hurdles for a health plan to overcome when trying to enter the ESL market or expand an existing stop-loss block, the market can provide meaningful opportunities.

Since 2006, when health plans represented just over one-third of the ESL marketplace, health plans have grown to represent nearly 60% of the market. A majority of this growth in that time period has been concentrated in large, national health plans, whose market share has more than doubled, from 16% to 33%.

The ESL market is different from the fully insured market that comprises the majority of most health plans’ premiums. As such, it is important that health plans wishing to enter (or grow in) the market understand the ramifications of the decision.

In this paper, Milliman’s Rob Bachler and RGA’s David Sipprell enumerate the considerations health plans should examine before diving into the ESL market.

China’s diagnosis-related group payment reform

The Chinese government has been actively promoting the structural reform of its healthcare system. Healthcare payment reform is expected to move ahead quickly with a pilot implementation of multiple social health insurance payment model types.  The country’s National Healthcare Security Administration (NHSA) indicated that it would develop a diagnosis-related group (DRG) standard suited to China’s healthcare system as well as social health insurance management capabilities.

In this article, Milliman consultants Jiang Guanjun and Qiuwen Peng examine the transition from the currently mainstream fee-for-service model to the DRG payment model, the history of DRG in foreign markets, and the potential challenges of having a DRG payment model in China’s system.