Understanding the Final Rule
To fully appreciate the Final Rule, we need to start with the Final Rate Notice published a few days earlier. CMS cut benchmark payments to health plans by 0.16%. While there has been disagreement in the payer community about the practical impact of this cut, CMS projects a 3.7% increase in overall revenues for plans in 2025. The headline, however, is the $9.2 billion savings for the Medicare Trust Fund in 2025, largely due to changes in the risk model, resulting in a 2.45% reduction in Hierarchical Condition Categories (HCC) payments.
Key Updates for 2025
1. Member Experience Comes at a Price
As healthcare utilization and costs have risen, CMS’s decision to enact cuts increases pressure on plan margins. Plans are pulling back on supplemental benefits like vision, caregiver support, and food allowances. A recent McKinsey analysis noted that the market might have reached a saturation point, leading to a shift from a buffet to a curated menu of benefits.
Benefit Reductions May Not be the Answer
Wholesale benefit reductions are not a long-term solution. Consolidating member identification, copay, RxBin, supplemental benefits, and rewards on a single card reflects a trend toward a more consumer-friendly health plan experience. Despite economic pressures, member satisfaction and retention remain crucial for MA plan success. Average voluntary member attrition has increased from 12% in 2020 to 19% in 2024.
2. CMS Has Also Noticed the Supplemental Benefit Trend
CMS’s Final Rule introduces a requirement for personalized member outreach to remind beneficiaries of their unused supplemental benefits. This mid-year notice, required annually, must be mailed between June 30 and July 31. Complying with this requirement, amidst numerous member touchpoints, will be challenging for plans.
3. Risk Adjustment is Critical, But Agents and Brokers Likely Won’t Complete HRAs
The Final Rule’s blended approach to calculating risk scores in 2025 results in a 2.45% reduction in the risk model. Compensation rule changes for brokers and agents, eliminating premiums for activities like completing health risk assessment (HRA) surveys, may lead to a shift towards digital, telephonic, in-home, and paper surveys for HRA completion.
4. Part D is Poised to Have a Big Impact on MA Plans
Changes to the Medication Therapy Management (MTM) inclusion criteria will expand eligible membership for MTM. This includes adding HIV/AIDS to the list of core chronic diseases and revising the methodology for calculating the MTM cost threshold. By 2027, the eligible population for MTM services will nearly double, with significant cost implications for plans.
5. CMS Doubles Down on Health Equity
The 2024 Final Rule codified the parameters around the Health Equity Index (HEI), replacing the reward factor. The 2025 Final Rule reasserts CMS’s commitment to health equity by adding new requirements for utilization management criteria, including expertise in health equity and public availability of analysis results.
Moving into 2025 and Beyond
The 2025 Final Rule introduces significant changes, shifting the landscape for Star Ratings over the next several years. Maintaining a strong focus on member experience and retention remains essential, but achieving this will require health plans to adapt and invest in the necessary expertise, programs, and infrastructure to stay competitive and compliant.
Download the full white paper to understand how these updates will impact your health plan and the steps you can take to navigate these changes successfully.