Obamacare risk adjustment to transfer funds among insurers
Health insurers say new payments they face in connection with the Affordable Care Act could drive up premiums on individuals and small businesses and punish companies that are focusing on more efficient health care operations.
Simmering for months, the concerns among insurers boiled over Tuesday as the state Connector Authority issued notifications to inform 16 companies in the 650,000-person merged market of the new payments and charges under a risk adjustment program mandated under Obamacare.
Boston-based Minuteman Health covers 15,000 people in Massachusetts and New Hampshire and is being hit with a charge of $3,064,679.
"It represents about 71 percent of our total premium for 2014," CEO Tom Policelli told the News Service. "I think absurd or crazy would be the appropriate words."
The Connector said the program prevents "denial of coverage and higher premium charges to people with pre-existing conditions" and is "intended to balance out the risk - or cost - of insuring less-healthy people, and maintain an open market for consumers." Based on an analysis of claims data by the consultant Milliman, payments are made by carriers determined to have members with lower-than-average risk and to carriers whose members have a higher-than-average risk.
Connector officials say the program will result in $61 million in transfers among insurers, with Blue Cross Blue Shield HMO Blue set to receive nearly $50 million and Blue Cross Blue Shield of Mass. in line to receive about $1.84 million. Neighborhood Health Plan faces the biggest payment of $27.6 million followed by Fallon Community Health Plan, which was notified it must pay $11.9 million.
The transfers represent about 3 percent of the $1.98 billion in merged market premiums, according to the Connector.
"You're seeing a massive money transfer among plans and it does raise concerns about the stability of the marketplace if these continue in perpetuity," Massachusetts Association of Health Plans CEO Lora Pelligrini said. "The risk adjustment mechanism makes sense for states in transition but in Massachusetts we've had many of these rules for years. I not sure what problem we're trying to solve."
Gov. Charlie Baker's administration has seized control of the Connector Authority. While Baker has objected to some aspects of Obamacare as too rigid for Massachusetts, one of his appointees to the Connector Board said the federal government has not showed any willingness to be flexible about the risk adjustment program.
In a statement, Health Connector Executive Director Louis Gutierrez said, "Massachusetts has long held the belief that health insurance should be available to everyone, regardless of their health status. A risk adjustment process will help ensure health care continues to be accessible for people of all health statuses."
In an interview with the News Service, Gutierrez said he couldn't comment on potential 2015 risk adjustment assessments, but added that his concern about the impact on the overall marketplace has "lessened" after going through the process.
"I think that one thing we are always attentive to is general market stability. The numbers as we've gone through various scenarios have somewhat lessened our concerns about general market stability issues. We do want to keep a close eye on plans that are carrying a heavy burden in the process," he said.
Policelli said Minuteman would be able to make the payment, but said the charge is based on a flawed formula that punishes companies that have attracted customers with narrower plans that feature limited networks. He said plans could see costs spike by 15 to 25 percent.
"Anything this far out of whack will be changed," he said. "It's just a matter of how and how quickly."
Gutierrez agreed that some plans that did not fully account for risk adjustment in their 2014 premium rates could be seeking adjustments to consumer premiums.
Pelligrini said some plans that developed new limited and tiered network products at the direction of the Legislature under a 2012 health care cost control law are now being punished under the federal risk adjustment rules for developing products that became popular with a younger, healthier population due to their affordability. Those plans typically carry a 14 percent discount, according to MAHP.
Gutierrez said, "I don't know that it necessarily undermines the calls for innovation or for innovative means of containing health care costs. I do think it does introduce a very new element to everyone's pricing that I don't think anyone fully anticipated until they saw how the law played out in practice."
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