Coventry joins WellCare in ending plans next year

Coventry Health Care Inc. on Tuesday became the second health insurer this week to announce that it will leave a fast-growing segment of the Medicare Advantage market next year, forcing more than 300,000 people to find new coverage.

The Bethesda, Md.-based insurer said in a statement it will not renew its private fee-for-service product. The company cited profitability "in light of federal reimbursement rates and medical cost trends."

Coventry has 318,000 people enrolled in that Medicare Advantage product, a total that has grown 65 percent over the past year.

Private fee-for-service plans do not have networks, allowing patients to see any health care provider they wish as long as the provider accepts the plan.

WellCare Health Plans Inc. said Monday it would not renew its Medicare Advantage private fee-for-service contracts for next year. The Tampa, Fla.-based insurer has about 110,000 members receiving that coverage.

Medicare Advantage plans allow the elderly and disabled to receive benefits through private health insurers. The plans receive a government subsidy and generally offer more benefits than traditional Medicare, but they've drawn criticism for their cost.

Many analysts who follow the insurance industry expect government reimbursement rates for the plans to fall as much as 5 percent next year.

The private fee-for-service plans also will be required to develop networks starting in 2011. Analysts have said that could force many insurers to drop the products. WellCare cited that as a reason for ending its contracts.

"Investing to build the provider networks ... would be unwise given the geographic dispersion of our membership and the uncertainty of Medicare rates in rural markets," a company spokeswoman said in an e-mail.

A lack of networks allows insurers to increase membership quickly because they don't have to negotiate contracts with doctors and hospitals, Wachovia analyst Matt Perry said in an interview.

"They just blanketed markets with private fee-for-service plans, and it didn't take any investment for them," he said.

Oppenheimer analyst Carl McDonald said in a research note that seniors will see increases in premiums and a reduction in benefits next year, which will force them to spend more out of pocket.

"But seniors who are forced to pick a new plan are going to be even more displeased, particularly if it means that a favored physician or specialist is no longer accessible," he wrote.