Trends in Medicare Advantage optional supplemental benefits

Overview

Optional supplemental benefits (OSBs) are benefits that are not covered by original Medicare and which Medicare Advantage organizations (MAOs) offer to plan members for an additional premium. If offered, members can elect to purchase OSB coverage from their Medicare Advantage (MA) plans and receive additional benefits. This differs from mandatory supplemental benefits (MSBs), which are benefits not covered by original Medicare that MAOs can choose to provide for all members who enroll in their plans, with no additional premium attached. MAOs can offer multiple OSB package options to members, and multiple supplemental benefits can be bundled together under each package. According to Milliman’s analysis of publicly available data, over 30% of all MA plans in 2021 offered at least one OSB package.

This paper discusses OSBs offered by MAOs in general enrollment plans from 2017 to 2021. A very small proportion of special needs plans (SNPs) offered OSBs—about 7% of all SNPs in 2021—and we excluded them from this analysis. We examine the prevalence of OSBs by plan type, MAO size, and benefits included. Additionally, we examine trends in premium for members who elect to purchase OSB coverage.

Key takeaways

• An increasing number, but decreasing percentage, of plans in the MA market are choosing to offer OSBs. This is due in part to a large number of new plans in the MA market in recent years, and the decreased likelihood of a new plan choosing to offer an OSB in its first few years of operation.
• A significant increase in the prevalence of mandatory supplemental preventive and comprehensive dental coverage has likely contributed to the decrease in dental OSB prevalence, as mandatory coverage reduces the need for additional optional coverage of the dental benefit.
• Preventive and comprehensive dental services are the most common benefits to be included in OSB packages. Only 2% of plans in 2021 offered OSBs that did not include dental coverage.
• The size (by enrollment) of an MAO was a significant predictor in the likelihood of a plan offering an OSB in 2017 but has become less significant in the years following.
• OSB premiums steadily increased from 2017 to 2021, which is directly opposite the declining average premium observed year-over-year for MA plans themselves.

Analysis

We utilized publicly available data from the Centers for Medicare and Medicaid Services (CMS) for this analysis, which was summarized utilizing the 2021 Milliman MACVAT® tool. Benefit data for all years was summarized from the plan benefit packages (PBPs) published by CMS for each year reviewed, for 2017 through 2021.¹

OSB prevalence by plan type and enrollment

Figure 1 summarizes the plan count and market share of MAOs offering OSBs from 2017 to 2021, considering preferred provider organization (PPO) and health maintenance organization (HMO) plans separately. We included HMO and HMO-point-of-service (HMO-POS) plans in the HMO plan type.

Figure 1: Count of Plans Offering OSBs by Plan Type, 2017 to 2021

The number of HMOs and PPOs offering OSBs has increased steadily from 2017 to 2021. When considering the percentage of plans in the market offering OSBs, however, the prevalence of OSBs has declined from 2018 to 2021. In 2018, 42% of general enrollment plans offered at least one OSB, while in 2021 38% of general enrollment plans offer at least one OSB. This downward trend in OSB prevalence is observed in HMOs, which dropped from 42% to 38% offering OSBs from 2018 to 2021, and in PPOs, which increased from 2018 to 2019, but then dropped from 43% to 38% offering OSBs from 2019 to 2021. This is attributed, in part, to a significant increase in new plans entering the MA market from 2019 to 2021 relative to 2017 and 2018. New plans are less likely to offer OSBs in their first few years of operation than mature plans. In 2021, new plans accounted for over 16% of general enrollment plans in the market and only 26% of these new plans offered an OSB. Even existing plans, however, were less likely to offer OSBs in 2021 than they were in 2018—40% offer OSBs in 2021 versus 44% in 2018. This may be related to a rise in the prevalence in mandatory supplemental benefits observed from 2017 to 2021.² As plans choose to offer more supplemental benefits as mandatory, they are less likely to continue to offer OSBs.

Additionally, we considered the size of the MAOs (by enrollment) that offer OSBs, as shown in Figure 2.

Figure 2: Percentage of Plans Offering OSBs by Carrier Size, 2017 to 2021

We categorized MAOs by their 2021 enrollment (or most recent year of enrollment if no longer in the market in 2021), as follows:

• Small: Fewer than 20,000 members.
• Medium: More than 20,000 and fewer than 250,000 members. Each Blue Cross Blue Shield organization is counted individually, so many of these MAOs are captured in this category rather than in the Large category.
• Large: More than 250,000 members. This group includes organizations such as Anthem, Centene, Cigna, CVS, Humana, Kaiser, and UnitedHealthcare.

In 2017, large MAO plans were considerably more likely to offer OSBs than small MAO plans, with 50% of large and 17% of small MAO plans offering them. In 2021, a higher percentage of large MAO plans than small MAO plans continue to offer OSBs, but the difference has narrowed to only 5% (35% versus 30%). Medium MAO plans were the most likely to offer an OSB in 2021, with 48% offering at least one.

Because MAOs with the smallest enrollment are the least likely to offer plans with OSBs, the percentage of members enrolled in a plan with an OSB is higher than the percentage of plans offering an OSB. In 2021, 47% of general enrollment plan members were in a plan offering an OSB, while only 38% of plans offered an OSB. The percentage of members in plans offering an OSB has been consistently higher than the percentage of plans offering an OSB from 2017 to 2021, but the difference has narrowed over time.

Public information on the number of members in a plan who elect OSB coverage is limited and outdated. We reviewed publicly available 2015 Bid Pricing Tools (BPTs), summarizing OSB experience for MAOs offering an OSB in 2013. The majority of these OSB offerings, about 75%, enrolled 20% or less of the overall plan members electing OSB coverage. Only 10% of these MAOs saw OSB election rates of 30% or more of members.

OSB prevalence by benefit type

Plans offering OSBs have the flexibility to include multiple supplemental benefits in one OSB package. For example, a plan could offer an OSB package that includes dental and vision coverage, and members who elect to purchase this OSB package would receive both benefits. Certain supplemental benefits are much more likely to be offered as part of an OSB package than others. Figure 3 contains the counts of general enrollment plans covering specific benefits under an OSB in 2021.

Figure 3: Count of Plans Including Specific Benefit Coverage in OSB Packages, 2021

Figure 3 shows that dental services are by far the most likely to be included in an OSB package. In 2021, 37% and 28% of all general enrollment plans in the market (not just those offering OSBs) offered comprehensive and preventive dental in an OSB, respectively. Vision and hearing benefits are the next most prevalent, followed by other less common supplemental benefits.

Figure 4 displays the prevalence of preventive and comprehensive dental benefits included in OSB packages over time. Note that plans often offer OSB packages containing both preventive and comprehensive dental, and such plans are included in both the preventive and comprehensive dental coverage percentages.

Figure 4: Percentage of Plans With Dental Coverage in OSBs, Limited to Plans With OSBs, 2017 to 2021

Of the plans that offered OSBs in 2021, 97% of them included comprehensive dental in an OSB package. This rate has increased steadily from 89% of plans in 2017. Preventive dental coverage in OSBs, on the other hand, has decreased from 89% in 2018 and 2019 to 73% in 2021. This difference aligns with the prevalence of these two benefits in the mandatory portion of MA plan benefits. The prevalence of preventive dental as a mandatory supplemental benefit has grown considerably over the last five years, with nearly 89% prevalence in 2021, relative to less than 60% prevalence in 2017.³ As prevalence of mandatory supplemental benefit coverage for dental services increases, the need for OSB coverage decreases.

Optional and mandatory coverage

Some plans design OSBs offering richer coverage on a specific benefit that the plan also offers as a MSB; for example, a plan could offer a larger optional eyewear limit in addition to its mandatory eyewear limit. All plan members would receive eyewear coverage up to the mandatory limit, but members could also elect to pay the OSB premium and receive eyewear coverage up to the higher optional limit. Figure 5 displays the percentage of plans covering a particular benefit in an OSB that also offer MSB coverage for the same benefit. Figure 5 only considers plans offering the specific benefit under an OSB and is limited to the benefits most frequently observed in this type of arrangement.

Figure 5: Percentage of Plans With Mandatory and Optional Coverage, Limited to Plans with Optional Coverage, 2017 to 2021

Figure 5 shows significant movement over five years in the prevalence of plans that offer a specific benefit as optional that also choose to offer mandatory coverage for the same benefit. Prevalence of preventive dental services and eyewear with mandatory coverage has risen steadily, making these benefits the most likely to be covered as MSBs when also offered as optional in 2021. These benefits are followed by comprehensive dental, which jumped significantly from 2020 to 2021. In 2017, eye exams and transportation were the most commonly covered as mandatory when also optional, but both have fallen in prevalence since.

OSB premiums

Beneficiaries who elect OSB coverage pay an additional premium to receive this coverage. CMS enforces two rules related to a OSB premiums:

1. The plan’s projected margin on the OSB must be less than 15% of the premium.
2. The plan’s projected OSB margin plus OSB administrative expense must be less than 30% of the premium.⁴

As long as these conditions are met, plans can set their OSB premiums as they choose.

As previously discussed, plans can include multiple benefits in one OSB package, and the vast majority of OSBs include dental coverage. In fact, only 2% of plans in 2021 offered OSBs that did not include dental coverage. In order to examine OSB premiums, we separated OSB packages into three categories: OSBs covering preventive dental, OSBs covering comprehensive dental, and OSBs covering both preventive and comprehensive dental. Figure 6 displays the premiums for these three types of OSB packages from 2017 to 2021.

Figure 6: Average OSB Premium by Dental Coverage Included in Package

Figure 6 shows a consistent relationship in OSB premiums from 2017 to 2021. OSBs including preventive but not comprehensive dental coverage had the lowest premiums, on average. Preventive dental services, which include oral exams, routine cleanings, and x-rays, tend to be less costly than comprehensive dental services, which can include extractions, root canals, oral surgeries, and more. OSB packages including both preventive and comprehensive dental coverage had the highest premiums, on average. Furthermore, Figure 6 shows that OSB premiums increased from 2017 to 2021. This is the opposite of the premium trend observed in the Medicare Advantage market, which shows average member premiums decreasing over time.⁵

Methodology

In performing this analysis, we relied on the 2017 through 2021 Milliman MACVAT®. The Milliman MACVAT contains MA plan details and benefit offerings sourced from publicly available data released by CMS, which is then compiled, sorted, and summarized into a user-friendly format. We relied on 2013-2015 historical BPT data released by CMS for actual OSB enrollment information. We excluded SNPs, Medicare-Medicaid plans (MMPs), Employer Group Waiver Plans (EGWPs), Program of All-Inclusive Care for the Elderly (PACE) plans, Part B-only plans, Cost plans, Medicare Medical Savings Account (MSA) plans, and Private Fee-For-Service (PFFS) plans from our analysis.

Caveats and Limitations

Julia M. Friedman and Mary G. Yeh are actuaries for Milliman, members of the American Academy of Actuaries, and meet the qualification standards of the Academy to render the actuarial opinion contained herein. To the best of our knowledge and belief, this information is complete and accurate and has been prepared in accordance with generally recognized and accepted actuarial principles and practices.

The material in this report represents the opinion of the authors and is not representative of the view of Milliman. As such, Milliman is not advocating for, or endorsing, any specific views contained in this report related to the Medicare Advantage program.

This report is intended to summarize optional supplemental benefits offered by MA plans from 2017 through 2021. This information may not be appropriate, and should not be used, for other purposes. We do not intend this information to benefit, and assume no duty of liability to, any third party that receives this work product. Any third-party recipient of this report that desires professional guidance should not rely upon Milliman’s work product, but should engage qualified professionals for advice appropriate to its specific needs.

The credibility of certain comparisons provided in this report may be limited, particularly where the number of plans in certain groupings is low. Some metrics may also be distorted by benefit changes in a few plans with particularly high enrollment.

In preparing our analysis, we relied upon public information from CMS, which we accepted without audit. However, we did review it for general reasonableness. If this information is inaccurate or incomplete, conclusions drawn from it may change.

¹CMS. Benefits Data. Retrieved September 30, 2021, from https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MCRAdvPartDEnrolData/Benefits-Data.

² Friedman, J. & Yeh, M.G. (December 2020). Prevalence of Supplemental Benefits in the General Enrollment Medicare Advantage Marketplace: 2017 to 2021. Milliman White Paper. Retrieved September 30, 2021, from https://www.milliman.com/en/insight/prevalence-of-supplemental-benefits-in-the-general-enrollment-medicare-advantage-marketplace.

³Ibid.

⁴CMS. Bid Forms and Instructions: 2022. Retrieved September 30, 2021, from https://www.cms.gov/medicarehealth-plansmedicareadvtgspecratestatsbid-forms-instructions/2022.

⁵Friedman, J., Swanson, B.L., Yeh, M.G., & Cates, J. (February 2020). State of the 2020 Medicare Advantage Industry: As Strong as Ever. Milliman Research Report. Retrieved September 30, 2021, from https://www.milliman.com/en/insight/state-of-the-2020--medicare-advantage-industry-as-strong-as-ever.