HCSC doubles down on Medicare Advantage as market share declines

Health Care Service Corp. plans to expand its Medicare Advantage business into another 150 counties next year as the insurer seeks to gain a foothold in an increasingly competitive market for private Medicare plans. 

The expansion represents the largest in the history of the not-for-profit company, which sells Blues Cross and Blue Shield plans in Illinois, Montana, New Mexico, Oklahoma and Texas. The insurer must obtain clearance from the Centers for Medicare and Medicaid Services to offer Medicare Advantage policies in these new counties.

“There might be no more competitive space in all of health insurance than Medicare Advantage,” said Nathan Linsley, the company’s senior vice president of government and individual markets. “We see significant competition both from national carriers and we’ve also seen a lot of competition from newer entrants.”

HCSC also broadened the geographic reach of its Medicare Advantage operations last year when it ventured into 90 new counties. That helped the company increase Medicare Advantage membership by 10,000 to 120,000 as of Jan. 1, according to Chartis Group data.

Despite that growth, HCSC’s Medicare Advantage market share fell to 3.4% at the start of the year, down from 4.4% in 2019, according to the Chartis Group. The insurer counts nearly 7.5 million members across its business lines. 

“Their presence is mostly in the commercial space and, like so many of the Blues, they’ve not really seen measurable enrollment in Medicare products,” said Nick Herro, a principal at the Chartis Group. 

Blue Cross and Blue Shield plans’ Medicare Advantage market share shrank from 15.4% in 2019 to 13.9% this year, Chartis Group data show. National carriers such as UnitedHealth Group’s UnitedHealthcare, Centene and CVS Health’s Aetna captured the customers Blues plans lost, the consulting company found.

Blues plans face a disadvantage compared with national companies because, in many cases, the Blue Cross and Blue Shield Association limits member plans’ geographic reach, Herro said. Expanding to new regions has been key to the growth strategies for-profit Medicare Advantage insurers have executed, he said. 

“There’s different ways to grow outside of those constraints, but their options are less than a for-profit plan or a national plan,” Herro said.

In the five states where it operates, HCSC seeks to differentiate itself by offering plans that require no out-of-pocket costs, Linsley said. HCSC also aims to claim space in the crowded market by focusing on rural and underserved counties, he said. The company expects double-digit percentage growth in Medicare Advantage enrollment next year.

Medicare Advantage plans have attracted a smaller share of Medicare beneficiaries in rural areas than in metropolitan areas, in part because of patient concerns about narrow networks, said Ari Gottlieb, a principal at A2 Strategy Group. Some insurers likewise have been reluctant to enter rural Medicare Advantage markets because there are so few providers, he said.

“If you’re the only hospital in town, [you] start from a stronger negotiating position than [in] competitive urban markets, and that’s going to influence product design and benefit offerings,” Gottlieb said.

Less competition in rural regions has translated to less generous Medicare Advantage benefits, which also makes the privatized form of Medicare less attractive, Gottlieb said. But that may be changing.

As the Medicare Advantage market gets increasingly competitive, newer entrants are looking at rural markets as a way to compete with national rivals, Gottlieb said. Insurtechs Clover Health and Alignment Healthcare, both of which recently announced expansion plans focused primarily on rural communities, are examples, he said.