Small in­sur­ers take big hits un­der ACA’s risk-ad­just­ment pro­gram

Modern Healthcare - - NEWS - By Shelby Liv­ingston

Small health in­sur­ers and the few re­main­ing co-op plans were again socked with large charges un­der the Af­ford­able Care Act’s risk-ad­just­ment pro­gram.

The CMS in late June re­leased data for the third year of the ACA’s con­tro­ver­sial risk-ad­just­ment pro­gram, which shuf­fles money from plans with healthier en­rollees to those with sicker ones. The agency also re­leased the 2016 pay­ments un­der the tem­po­rary rein­sur­ance pro­gram, which pro­tects health in­sur­ers against costly claims.

For ACA plans sold last year, 445 in­sur­ers split a to­tal of $4 bil­lion in rein­sur­ance pay­ments.

The per­ma­nent risk-ad­just­ment pro­gram is meant to keep ACA in­sur­ers from cherry-pick­ing healthier plan mem­bers over sicker, costlier ones. It col­lects pay­ments from plans with healthier than av­er­age mem­bers and dis­trib­utes that money to plans sad­dled with high-cost mem­bers. The zero-sum pro­gram is based on pa­tients’ risk scores, which fac­tor in de­mo­graphic in­for­ma­tion and health con­di­tions. The CMS said 709 in­sur­ers par­tic­i­pated in the risk-ad­just­ment pro­gram.

The for­mula used to cal­cu­late pay­ments in the risk-ad­just­ment pro­gram has been crit­i­cized for un­fairly fa­vor­ing larger plans with more claims ex­pe­ri­ence. Smaller com­pa­nies that sell on the ACA’s ex­changes have said they don’t have as much claims data, and there­fore their mem­ber­ship base looks healthier than it is. Sev­eral, in­clud­ing Ev­er­green Health co-op in Mary­land, New Mex­ico Health Con­nec­tions and Min­ute­man Health of Mas­sachusetts filed suits last year to halt the pro­gram.

Nev­er­the­less, for 2016 the CMS said Ev­er­green must pay $9.4 mil­lion in risk-ad­just­ment pay­ments, though it will re­ceive $2.5 mil­lion from the rein­sur­ance pro­gram. Min­ute­man will have to pay $25.4 mil­lion in risk-ad­just­ment pay­ments, and New Mex­ico Health Con­nec­tions will pay $8.9 mil­lion.

Sev­eral large health plans also lost big money un­der the pro­grams. Kaiser Foun­da­tion Health Plan must pay $437.8 mil­lion in risk-ad­just­ment pay­ments for its ACA in­di­vid­ual and small­group plans in Cal­i­for­nia. It’s set to re­ceive $99.5 mil­lion in rein­sur­ance pay­ments.

The big­gest win­ners were Blue Cross and Blue Shield-af­fil­i­ated plans. Un­der the ACA, sicker pa­tients flocked to the Blues’ well­known brand, hence the com­pa­nies’ higher risk-ad­just­ment pay­ments.

Blue Cross and Blue Shield of Florida will rake in $615.7 mil­lion in risk-ad­just­ment and rein­sur­ance pay­ments com­bined—the largest amount among par­tic­i­pat­ing in­sur­ers. Blue Shield of Cal­i­for­nia will re­ceive $572 mil­lion.

Re­spond­ing to in­sur­ers’ de­mands, the CMS changed the risk-ad­just­ment for­mula for 2017, in­clud­ing ac­count­ing for peo­ple who en­roll for only a por­tion of the year be­cause of ma­jor life changes. In 2018, the for­mula will fac­tor in pre­scrip­tion drug data for the costs of cov­er­ing en­rollees.

Still, the CMS said the risk-ad­just­ment and rein­sur­ance pro­grams are work­ing as they’re sup­posed to. In­sur­ers with high paid claims were more likely to re­ceive risk-ad­just­ment pay­ments, while those with rel­a­tively low paid claims were more likely to pay in. The CMS noted that in­sur­ers in the low­est quar­tile of claims costs on av­er­age were as­sessed a risk-ad­just­ment charge of 18% of to­tal col­lected pre­mi­ums, while those in the high­est quar­tile of claims costs re­ceived a risk-ad­just­ment pay­ment of about 27% of their to­tal pre­mi­ums. In­sur­ers with higher claims costs also re­ceived larger rein­sur­ance pay­ments.


The big­gest win­ners were Blue Cross and Blue Shield­af­fil­i­ated plans. Un­der the ACA, sicker pa­tients flocked to the Blues’ well­known brand, hence the com­pa­nies’ higher riskad­just­ment pay­ments.

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