Health Connector chief: We can't change risk-adjustment process

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By Emily Micucci

The head of the state agency that helps enroll uninsured residents with health care coverage said he can’t make changes to the state’s risk adjustment program, a feature of the Affordable Care Act designed to spread the risk of insuring the sickest patients through the state’s health insurance exchange.

“We’re not at a point in the process where we are at liberty to change course,” said Louis Gutierrez, executive director of the Massachusetts Health Connector Authority. However, Gutierrez added that the Health Connector may review whether the state’s role in the risk adjustment process makes sense in the long run; the federal government handles it for health exchanges in all other states.

Fees announced

Gutierrez’s comments came the same day the Health Connector announced risk adjustment payments and receipts for the 16 companies participating in the state’s merged health insurance market — a pool of about 650,000 people — last year. It’s the first time the fees have been assessed under the Affordable Care Act.

Last week, chief executives at Worcester-based insurer Fallon Health, along with Minuteman Health and Health New England, sent a letter to Gutierrez asking that the state’s risk adjustment program be reviewed and revised because they said it unfairly impacts smaller insurance companies.

Insurers participating in the exchange will be responsible for making payments, or they'll receive money. For example, Blue Cross Blue Shield of Massachusetts, the state's biggest commercial payer, is scheduled to receive more than $51 million -- the largest sum any insurer will receive -- while Fallon, a much smaller insurer, will have to pay $11.8 million.

The payments were calculated through an actuarial process conducted by a contractor working for the Health Connector, which measured the average health risk of the average patient who participates in the exchange.

The state created a formula in conjunction with the insurers, which was approved by the federal Centers for Medicare and Medicaid Services (CMS) in March 2013, that reviewed each carrier’s membership and determined how its members fared compared to the overall average.

Claims data is provided by the carriers and analyzed by the consultant. Payments are made by carriers whose membership has a lower-than-average risk, while payments are forwarded to carriers whose members have a higher-than-average risk.

Fallon spokesman Robert Nolan said last week that the company had already been preparing for the risk adjustment payment and that it was pricing insurance products accordingly. Fallon also announced last week that it was laying off 30 employees.

Nolan issued a statement after the Health Connector announced the first round of risk adjustment payments Tuesday.

“We believe the Massachusetts risk adjustment program, in its current state, harms consumers, unfairly and incorrectly penalizes regional health plans, and will destabilize the state’s merged market,” Nolan wrote.

He said implementation of the program should be delayed to assure that data used in calculating the payments is correct and complete, and to give Health Connector officials a chance to review a report that Fallon, Minuteman and Health New England commissioned that found problems with the program, as well as to consider alternatives to risk adjustment.

“We will continue to work with all parties to evolve the program into one that is fair for consumers and health plans,” Nolan said.

Does state involvement ‘add value?’

With the federal government handling the risk adjustment process for the rest of the country,

Gutierrez, the Health Connector chief, said he couldn’t speculate about why Massachusetts has taken this on itself, except to say that the state “likes to control its own destiny in many ways, so it’s not surprising.”

Gutierrez said that while the Health Connector can’t make any changes to the state’s program at this time, (It was developed in 2012 and reinforced by CMS this year.), officials will be “examining the state’s role in the process.”

“I think we will be examining whether our execution adds value,” Gutierrez said.

Image source: Freedigitalphotos.net

(Note: This story was updated to correct the figures that Blue Cross Blue Shield of Massachusetts and Fallon Health will be receiving and paying out)