The first five to 10 years in the Medicare Advantage (MA) market are typically some of the most challenging years for an organization. In this paper, we discuss what a plan can expect for enrollment after this hurdle in subsequent years, and how the new entrant landscape has changed over time.
Over the past decade, the MA market has changed dramatically. Revenue pressures from the Centers for Medicare and Medicaid Services have intensified, the Part D benefit has been overhauled, and criteria for Star Ratings continue to evolve. Even in this increasingly challenging environment, we continue to see roughly a dozen new organizations enter the market each year. Five years ago, we published an article tracking a cohort of new entrants to the MA market during their first five years. In this update, we revisit the organizations that entered the market in 2015 or 2016 to see how they weathered the market’s shifting landscape. How many survived to Year 10? Of those, how many are thriving?
In this analysis, we identified a newer cohort of 24 MA organization startups between 2021 and 2022 and compared their characteristics and early experience with those of the original group. We followed this new cohort for five years to assess enrollment growth while continuing to track the original cohort’s performance beyond Year 5.
Key takeaways:
- Approximately one-third of new entrants exit by Year 5.
- Zero or near-zero Year 1 enrollment was a strong predictor of eventual exit from the market.
- Three-quarters of new cohort startups that were still operational in Year 5 were able to enroll at least 2,000 members, and many were able to capture approximately 1% of the market in their service areas.
- Nearly 40% of new cohort startups remaining in Year 5 enrolled more than 10,000 members.
- Enrollment growth depends on many things, including an effective marketing campaign, general brand recognition, competitive benefit design, high retention of existing members, and a strong provider network.
- Obtaining sufficient enrollment growth in the first few years in the market is a critical component to being successful in the MA market, providing more leverage in contract negotiations and helping reduce administrative expenses per member.