ACA’s risk-ad­just­ment pro­gram en­dan­gers some ex­change plans

Modern Healthcare - - NEWS - By Bob Her­man

The lat­est data on the Af­ford­able Care Act’s risk-ad­just­ment pro­gram have some small health in­sur­ers up in arms. Many are de­mand­ing the fed­eral gov­ern­ment halt the pay­ments and make im­me­di­ate dra­matic changes to the pro­gram or risk hav­ing more health plans shut down dur­ing a pres­i­den­tial elec­tion year.

“If you keep the risk-ad­just­ment for­mula the way it is … right now for the next two to three years, you’re go­ing to lose a lot of these new en­trants,” said Dr. Peter Beilen­son, CEO of Ev­er­green Health Co­op­er­a­tive. “They are go­ing to end up with one or two big car­ri­ers in each mar­ket­place. That raises the rates.”

Beilen­son’s co-op, based in Mary­land, sued the fed­eral gov­ern­ment in June over the risk-ad­just­ment pro­gram—one of the law’s three in­sur­ance risk poli­cies—and ex­pects other in­sur­ers to join the le­gal bat­tle. Ev­er­green owes $24.2 mil­lion while the state’s dom­i­nant car­rier, CareFirst, will re­ceive more than $50 mil­lion.

Risk ad­just­ment shuf­fles money from plan to plan in each state, re­sult­ing in a zero-sum game. Plans with health­ier en­rollees fun­nel money into in­sur­ers with seem­ingly sicker en­rollees. The goal is to elim­i­nate cherry-pick­ing the health­i­est peo­ple.

How­ever, the gripe among smaller, re­gional plans and the new co-ops— which have far less cap­i­tal than more es­tab­lished in­sur­ers to com­fort­ably make large risk-ad­just­ment pay­ments—is that their mem­ber­ship bases look health­ier than they are. It’s un­clear whether many legacy car­ri­ers are re­ceiv­ing money due to at­tract­ing sicker pa­tients or if they have a leg up on cod­ing their mem­bers’ di­ag­noses.

“It’s kind of tricky to dis­en­tan­gle these two things,” said Tim Lay­ton, a health econ­o­mist at Har­vard Med­i­cal School. “Even if (large in­sur­ers) know which (mem­bers) have di­a­betes, they still have to get a doc­tor to code it. They can’t just as­sign a code.”

Blue Cross and Blue Shield plans, ex­clud­ing the for-profit An­them, cu­mu­la­tively will col­lect more than $1.4 bil­lion from risk ad­just­ment for 2015, ac­cord­ing to the lat­est CMS re­port. Sicker pa­tients flocked to the Blues’ well-known brand, there­fore jus­ti­fy­ing the com­pa­nies’ higher risk-ad­just­ment pay­ments. But they also likely have more his­tor­i­cal data to code more di­ag­noses, Lay­ton said.

Still, some of the big car­ri­ers are pay­ing large sums into the risk-ad­just­ment pool. Aetna’s obli­ga­tions for 2015 to­taled more than $600 mil­lion, and Kaiser Per­ma­nente’s charges reached $237.5 mil­lion.

Many pol­i­cy­mak­ers and econ­o­mists say risk ad­just­ment is less of a bur­den than an­other re­lated pro­gram: risk cor­ri­dors. Congress re­quired risk cor­ri­dors to be bud­get-neu­tral for 2014 and 2015 and pos­si­bly will do so again this year. In­sur­ers have re­ceived only 12.6% of their risk-cor­ri­dor re­quests, which has forced sev­eral in­sur­ers to sue and nu­mer­ous oth­ers to shut down.

In the mean­time, new and fast-grow­ing plans are ask­ing to be tem­po­rar­ily ex­empted from risk ad­just­ment or to cap pay­outs to 2% of pre­mium rev­enue. The CMS com­mit­ted to mak­ing some changes, al­though they won’t be ef­fec­tive im­me­di­ately. For ex­am­ple, start­ing in 2018, the CMS pro­posed that pre­scrip­tion drug data be used for risk ad­just­ment, an idea that in­sur­ers sup­port.

“If an in­di­vid­ual doesn’t have a di­ag­no­sis in a claim, at least the drugs they are tak­ing is a good in­di­ca­tor of the con­di­tions they may have,” said Matt Aug, pres­i­dent of Cox Health Plans, a hos­pi­tal-owned in­surer based in Spring­field, Mo., that only sells off-ex­change plans to in­di­vid­u­als and small busi­nesses. Cox owes $3.1 mil­lion un­der risk ad­just­ment for 2015, more than dou­ble what the com­pany ex­pected, and it still doesn’t an­tic­i­pate sell­ing on the ex­changes yet be­cause of the fi­nan­cial un­cer­tainty, Aug said.

But Sean Creighton, se­nior vice pres­i­dent of risk ad­just­ment at analytics firm Verisk Health and a for­mer CMS of­fi­cial, said ty­ing risk ad­just­ment to drug uti­liza­tion is a “ter­ri­ble idea.” He be­lieves it could force doc­tors to write un­nec­es­sary pre­scrip­tions, all in the name of cod­ing.

In­stead, he said the pro­gram could ben­e­fit from more spe­cific data from in­di­vid­ual in­sur­ers.

“CMS is not pro­vid­ing the data to al­low us to look at, in-depth, this kind of year-over-year vari­a­tion,” Creighton said.

A CMS spokesper­son said the agency has “en­cour­aged states to ex­am­ine whether any lo­cal ap­proaches, un­der state le­gal au­thor­ity, may be used to help ease the tran­si­tion for com­pa­nies in their state to the new health in­sur­ance mar­kets.”

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