Patients still playing games with Obamacare
industry, they’ve fallen off the media radar.
Nonetheless, they’re still important — or at least, the risk adjustment program is. Basically, this program looks at the health status of the patients covered by each insurer, and transfers money to insurers who cover sicker patients from insurers whose pool was healthier than average.
Why is this necessary, when Obamacare forbids companies from turning anyone down because of their health status? Because even if you can’t turn patients down, there are ways to tweak your offerings so that they are more attractive to healthy people, effectively cherrypicking a pool of especially healthy (and therefore profitable) patients.
For example, you could offer a free gym membership bundled with your insurance, which will presumably be more interesting to 23-year old triathletes than 64-yearold patients with multiple disabling conditions. Or you could make your coverage cheap but hard to use, which healthy people won’t notice but sick people very much will.
It’s hard to write regulations to stop this, so the law effectively says, “Go ahead and cherry pick; we’re going to take your excess profits and transfer them to the insurer that got stuck with all the sick people.”
In practice, though, deciding what constitutes an especially unhealthy pool is harder than it sounds. The administration is proposing two significant rule changes for 2018. One is to factor in prescription drug data to patient risk scores as well as age, sex and diagnoses. The other is to change the scoring for “partial year” customers who enroll outside of the normal open enrollment period. This second change is clearly aimed at quelling insurers’ worries that people are gaming the law by buying insurance to cover an expensive illness, and then dropping it as soon as they’ve gotten treatment.
The question that remains is, “Will this work?”
I’m not sure it’s going to do much. Gaming is one of the few true existential threats to the exchanges, because the whole point of gaming the system is to get a lot of expensive treatment while paying little in premiums. If this is widespread, then the problem is not going to be that a handful of insurers get especially costly patients; the problem is going to be that the entire exchange insurance pool has less money being paid in premiums than it is paying out in healthcare costs. Moving a little money around between insurers in that situation is the regulatory equivalent of rearranging the deck chairs on the SS Obamacare just as it steams into an iceberg.
The new proposal seems like an admission that gaming remains a problem despite the stricter documentation requirements. Which means that until the administration enacts stronger measures to stop it, the exchanges will remain in trouble, too. Megan McArdle is a Bloomberg View columnist.