What’s Next for Medicare Advantage: Part I - Frontline: Lessons Learned

By Lindsay Resnick, February 17, 2022

As its 20th anniversary quickly approaches, Medicare Advantage has surpassed 28 million members. 46% of eligible Medicare beneficiaries now choose an MA plan. The average Medicare beneficiary has access to over 40 plan options, many providing extra annual benefits valued at $2,000 compared to fee-for-service Medicare.

The top 25 Medicare Advantage insurers have almost 90% national market share. In a jam-packed marketplace dominated by mega-national plans and aggressive third-party aggregators. The battle for new members has never been tougher. And, while more than 3.5 million Americans turn 65 every year, they’re working longer, shifting retirement plans, reevaluating health and financial priorities, and unlike Medicare eligibles of yesteryear, this New-to-Medicare crowd has different motivations when it comes to their personal shopping and purchasing preferences.

Following are a few observations and insights from the 2021-22 Annual Enrollment Period.

National MA Plans

These industry giants leveraged outsized marketing and media spends to dominate consumer top-of-mind during AEP. From a constant TV presence to flooding mailboxes with direct mail to in-store sales kiosks at national retailers, these competitors crushed regional and local plans when it comes to advertising, both brand and direct response. Mega-national plans also proved to be adept at quick action on product enhancements and agent/broker engagement tactics that resulted solid lead generation and sales. The 6 largest MA plans claim stake to about 75% market share. In an analysis of large publicly traded MA plan growth, one Wall Street analyst is clear where it’s coming from: ‘private MCOs which are fragmented and subscale’. The largest MA plan, with almost 8 million members, captured roughly one out of every three people who joined Medicare Advantage this past year.

Track them and evaluate their product offerings, market messaging and selling tactics. Learn from your biggest competitors.

TMOs, EMOs and More

These third-party marketing organizations or ‘aggregators’ are disrupting the lead funnel with big investments in direct-to-consumer marketing schemes. With more than a dozen of these well-funded, commission- driven brokers, selling MA plans from multiple carriers, they’re eating into ‘lead share’ across the country. They’ve also gotten CMS’s attention after mounting complaints from consumers who reported being confused and misled. In 2020, CMS received 15, 497 complaints related to marketing, this past year there were 39,617 complaints, many tied to TMO activities. CMS’ 2023 proposed rule seeks to tighten marketing oversight and scrutiny. The biggest concern by carriers on business produced through aggregators is poor retention (i.e., rapid disenrollments, high ‘dropout’ rates).

Embrace direct response marketing tactics that work – data-driven targeting, compelling offers and creative, action-oriented messaging, and test, test, test!

Pre-AEP

Before AEP starts, ‘market warming’ with mail and DRTV continues to payoff. In fact, many say that if a plan misses pre-AEP market outreach, they’ve missed most of the available leads for the period. For some plans these early leads represent over half of all AEP volume. The big caution: it only works if your sales funnel and call center are prepared to handle these volumes and, most importantly, a ‘lead nurturing’ plan and process in place to optimize the value of these leads (e.g., responder non-converters do convert at higher rates). The other piece of the pre-AEP puzzle is brand building. Your plan’s brand is its relationship with the market, its reputation, and its promise to customers. Brand building throughout the year backs-up and bolsters every piece of lead generation marketing put into the market during AEP. Strong brands increase market share in highly competitive markets.

Be in front of your prospects during the year, particularly leading up to the start of AEP. Capitalizing on local presence and its associated value proposition to prospective members can be a powerful counter to national competitors.

The Workhorse

Direct mail is still proving to be Medicare Advantage’s direct response pillar. While recently plans have seen a year-over-year decline in response and lead rates, from a cost per lead standpoint it’s hard to beat mail: low cost, high conversion! That said, paid digital media is catching up, particularly on a cost per member basis. The big unknown is how much mail is driving people to the Web but not tracked and reported. One addition to the direct mail mix being used more frequently (as well as in other channels) are QR codes to gather leads faster (let’s be honest, who hasn’t interacted with a QR code restaurant menu over the past year?).

Direct mail isn’t dead! It remains a fundamental part of an integrated omnichannel MA marketing strategy…make it standout and optimize its lead generation ROI.

Star Ratings

About 70% of MA plans have 4 or more Stars…does it really matter to the consumer? Research shows that consumers don’t really understand CMS’ rating system. While it may not be integral to consumer decision making, a 4-Star rating is clearly competitive table- stakes in today’s MA marketplace. Putting together a competitive plan at 3.5 stars that has to go head-to-head against a 5-star plan isn’t a winning situation. And while conventional wisdom has been that these ratings don’t move the needle, a 5-Star rating does matter, particularly when it comes to bonus payments and the advantage of year- round acquisition emphasizing the 5-Star rating. If you got it, flaunt it!

CMS is changing Star rating guidance so pay attention to be sure your plan doesn’t slip and continues its journey to 5 Stars

Old School

Business Reply Card (BRC) performance is holding its own, generating a high percentage of leads when compared to digital and phone…especially pre-AEP (although in some markets slow postal processing impacted results). Again, diligent nurturing of these leads is a critical success factor. In terms of in-person vs. virtual seminars, some markets have seen pandemic-weary seniors willing to get out of their house to attend seminars again (FSIs remain primary promotion tactic). Elsewhere, after 2 years of Facetime and Zooming, prospects are more comfortable with a virtual event showing that ‘senior tech’ barriers may be weakening. But for many plans, low utilization of both in- person or virtual has meant no seminars at all. Continued investment in seminars is fading fast.

Old school or new, developing, engaging, and reinforcing your prospect relationships throughout the sales funnel makes lead nurturing a best practice for every successful MA plan.

Digitalization

Plans continue to increase digital customer acquisition budgets, but results are mixed. In many markets, search and social have performed well. Social had much stronger performance than previous years against efficient lead generation, proving the pandemic increased senior use of social media. Well-funded paid search that pulls though other channels can also be a strong lead generator. Aggregators also spent big in paid search. However, while it makes sense to follow the digital marketing trend, it’s not always as efficient, and conversions are lower compared to direct mail. Without question, digital should be part of any multichannel approach, but overall, the market isn’t there yet in terms of pushing the bulk of the acquisition marketing budget into this channel.

Balance is everything when it comes to the acquisition digital experience. It’s still more heavily weighted toward shopping vs. purchasing and budgeting needs to follow the market, not get ahead of it.

Supply Chain

Covid is disrupting and reshaping supply chains across industries, and Medicare Advantage marketing is no exception. From paper inventory and staffing shortages to print production capacity to delays of USPS first- class mail, even private freight, MA plans struggled with logistics throughout AEP. Timely in-home mail was probably most affected, and it affected everyone. It’s beyond Murphy’s Law! Supply chain issues will continue to create a volatile, unpredictable environment so plan for it and set realistic expectations to minimize late-stage anxiety and panic when the unforeseeable happens.

Plans must build supply chain unknowns into their go-to-market schedules going forward: start earlier than ever and give longer lead times for internal processes and budget approvals. Put another way: expect the unexpected!

Product Differentiators

What topped the list this past year: Part B premium givebacks and OTC allowances. And $0 premium or low dollar PPOs have emerged as the new normal, making these products a must have, since they’re available in every market. For consumers, MOOP “maximum out- of-pocket” is more important than ever, along with the overall monthly spending (which makes Part B givebacks a disruptor). But beware, one plan’s giveback was so popular they had to discontinue the offering given customer service challenges and low profitability. Benefits such as meals, transportation, dental, vision, and in- home support can also be found everywhere, creating a plan benefit ‘sea of sameness’. Figuring out how to turn these supplemental add-ons into effective marketing tools is tricky, but they can work to a Medicare plan’s advantage (no pun intended).

Not having a competitive MA product offering is a market killer – wasted lead generation dollars. Use in-depth market insights to understand how your products stand up in the competitive landscape; look back, look forward, and make informed product decisions.

Coming in the next post:  Part II - Next Up: Time To Get Real