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By Sara Hansard
Jan. 12 — The Department of Health and Human Services will review problems with the Affordable Care Act risk adjustment program, a top agency official told the J.P. Morgan Healthcare Conference in San Francisco.
The program is intended to compensate health insurers that cover sicker-than-average enrollees, but it has forced many smaller health insurers and nonprofit Consumer Operated and Oriented Plans (CO-OPs) created under the ACA to make large payments to other insurers, and some of them have called for a cap on payments.
The Obama administration will hold a public conference on the program March 25, acting Centers for Medicare & Medicaid Services Administrator Andy Slavitt said Jan. 11.
In addition, the Obama administration this week will announce that some special ACA enrollment periods outside of the normal annual sign-up period will be eliminated and others will be clarified, Slavitt said. “We've established an enforcement unit and have already terminated coverage for individuals who are improperly enrolled by certain brokers,” he said.
Health insurers have complained that many people are enrolling in plans during special enrollment periods, only to drop coverage after filing claims.
Martin Hickey, chief executive officer of the New Mexico Health Connections CO-OP and chairman of the board of the National Alliance of State Health CO-OPS, said that without knowing how much their risk adjustment payments will be for the 2015 plan year “we can only price up significantly to protect ourselves.”
Payments for the 2015 plan year will be made in 2016, but the 2015 payments may not be known until June, Hickey said. However, rates for 2017 must be filed by April, he said. CO-OP CEOs met with Slavitt Jan. 6 and asked for a cap of 2 percent of premiums for risk adjustment payments, he said.
CMS's invitation notice to the March 25 meeting in Baltimore said the conference will “discuss potential improvements to the HHS Risk Adjustment methodology for the 2018 benefit year and beyond.”
At the J.P. Morgan conference Slavitt said the HHS is “committed to making sure risk adjustment works as intended to allow coverage of individuals with pre-existing conditions.” He said the HHS will be providing early estimates of health plans' specific risk adjustment calculations, which will give plans “more timely information in order to facilitate informed rate-setting.”
Under the risk adjustment program, plans with healthier-than-average enrollees are required to make payments to plans with sicker-than-average enrollees, but the CO-OPs have said the data and the methodology for calculating the payments are faulty, and they have argued that new plans with little data on enrollees are at a disadvantage to well-established plans that have a history of claims data for their members.
The ACA requires insurers to cover people with medical problems without charging higher premiums, and premium variation is sharply limited for a few categories, such as broad age groupings, geographic regions or whether enrollees use tobacco.
Within the next 45 days there will be “other announcements and more specificity intended to address the risk pool,” Slavitt said. The CMS is expected to issue a final version of its Notice of Benefit and Payment Parameters for 2017, which includes regulations regarding the risk adjustment and other premium stabilization programs.
Slavitt said there are “four or five principal things” that have been suggested to the CMS to improve the risk adjustment program. Those include reflecting prescription drug costs and reflecting the fact that some people may only be in plans for part of a year, he said.
The one-year moratorium on the health insurance tax of $13.9 billion included in appropriations legislation enacted in December 2015 will help stabilize premiums for 2017, Slavitt said. In addition, the reinsurance program in effect from 2014 through 2016, the third premium stabilization program in the ACA, paid $7.9 billion, 25 percent higher than expected. It has also been “a stabilizing force to date,” he said.
Tom Policelli, chief executive officer of Boston-based CO-OP Minuteman Health Inc., told Bloomberg BNA Jan. 12 that the conference is “a good idea for the longer term.” However, he said, “We need to have something in the very near term so we can keep competition in the marketplace.”
CO-OPs and some other small, new plans have called for implementing “circuit breakers,” or upper limits on the amount of a plan's risk adjustment transfer charge, and New Mexico Insurance Superintendent John Franchini also called for capping payments under the program.
Franchini told Bloomberg BNA Jan. 12 that he estimates that about 90 health insurers could be at risk over the next two years from risk adjustment payments. “The companies on the marketplace that are new, smaller, hospital-control, regional companies, will be attacked by this formula,” he said. Those companies are keeping costs down by using managed care instead of fee-for-service payments, and “we need to protect them until they can grow,” he said.
Korey Harvey, deputy commissioner of insurance for Louisiana, told Bloomberg BNA Jan. 12 that most state insurance regulators have not yet made a commitment to the 2 percent cap on premium payments for risk adjustment.
The proposals included in CMS's notice of benefit and payment parameters for 2014 don't “really get to the heart of the matter,” Harvey said. He suggested that “CMS could make some changes that take into account differences in networks.” Plans that have low premiums typically have narrow networks, but “that low premium doesn't give proper weight to the enrollees” in terms of their health status, he said.
In addition, the risk adjustment calculations are currently done at the statewide level, but some insurers operate only within certain regions of a state, Harvey said. Their enrollees “may look healthier than they actually are,” he said. Further, some insurers are better at coding than others, he said.
“Some insurers, usually small ones, have gotten the short end of the stick,” Harvey said. “Something has to be done.”
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