Yesterday marked 1 the year anniversary since the above Politico article “Cuomo Administration Asks Feds for ‘Immediate Changes’ to Risk Adjustment Program” was published. Little has changed and the controversial ACA Risk Adjustment is proving to be a company killer rather than the intended savior.
What is Risk Adjustment?
Risk Adjustments is one of three Rs of ACA regulations – Risk Adjustment, Reinsurance, and Risk Corridors – Millennium Medical Solutions Inc. Small insurers rack up large charges while Blues benefit under ACA’s risk-adjustment program – Modern Healthcare Modern Healthcare business news, research, data and events
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 sick, high-cost members. The zero-sum program is based on a patient’s risk score, which factors 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 small plans and co-ops formed under the ACA have sued over the risk-adjustment formula. Evergreen Health co-op in Maryland, for instance, sued in June 2016 to block the federal government from requiring it to pay millions in risk-adjustment charges. Co-ops New Mexico Health Connections and Minuteman Health of Massachusetts filed similar suits last year.
This punishes start-up growth companies. A local example would be small group/individual market CareConnect’s $129M and Oscar’s $44M negative adjustment while United has had a windfall of nearly $330M positive adjustment. Put another way, this is an unintended welfare program for the rich legacy Insurers paid for by the very companies needing help in the market.
Risk-adjustment transfers for individual-market plans
Risk-adjustment transfers for small-group market plans
Cuomo Adjusting to Risk Adjustment?
Since last months NYS 2018 rate filing announcement the justifiable calls from members have been “Why are my #CareConnect rates going up 19%”. A whopping $119 Million in RISK ADJUSTMENT is owed to Center for Medicare Services. Alarmingly, this is not a political partisan issue and all agree on the flaws and unintended consequences. CMS has acknowledged the flaws but are working with a 5 year time frame. Sadly young companies cannot afford to stay in business by then.
The unofficial 3 tests presumptions of good regulations have been missed:
- Regulations must be non-political
- Designed with excellence
- Executed perfectly
The good news is that CMS can change this regulation without an act of Congress. Regrettably, no State appeal has been victorious as of yet. For Governor Cuomo’s part the majority of the policies outlined in a press release from the governor’s office do not directly address the Risk Adjustment appeal and are already state law and would do nothing to protect New Yorkers’ from the skyrocketing costs they’d likely bear if the subsidies that underpin the Affordable Care Act are reduced or repealed.
In conclusion, to the clients suffering a 19% increase for 2018 the biggest fear is not having to change companies. The real fear, in fact, ought still to be will that company be around next year? This regulation, ironically,only affects individuals and small busnesses.