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By Sara Hansard
May 27 — Without more flexibility from the HHS in administering an ACA program intended to help insurers covering sick enrollees, more nonprofit CO-OPs and other small, new entrants into the health insurance marketplaces may go out of business.
State insurance officials and insurance company executives told Bloomberg BNA that steps taken by the HHS to help states mitigate problems from the Affordable Care Act risk adjustment program appear to be of little use.
The risk adjustment program requires companies that cover healthier-than-average enrollees make payments to companies with sicker-than-average members, and is under fire. Consumer Operated and Oriented Plans created with government funding under the ACA as well as other new plans have had to make large payments to established companies, which has led them to seek changes from the Centers for Medicare & Medicaid Services.
CMS seems to be pushing responsibility to the states to address this problem. In a May 11 interim final rule on special enrollment periods and the CO-OP program, the CMS said, “HHS has become aware that certain issuers, including some new, rapidly growing, and smaller issuers, owed substantial risk adjustment charges that they did not anticipate. HHS has had a number of discussions with issuers and State regulators on ways to help ease issuers’ transition to the new health insurance markets and the effects of unanticipated risk adjustment charge amounts.”
The agency said that while a “robust” risk adjustment program is necessary to make markets work under ACA rules guaranteeing that people with medical problems can buy coverage, “We are sympathetic to these concerns and recognize that States are the primary regulators of their insurance markets. We encourage States to examine whether any local approaches, under State legal authority, are warranted to help ease this transition to new health insurance markets. Additionally, we will also continue to seek ways to improve the risk adjustment methodology.”
The CMS is expected to release figures for 2015 risk adjustment payments June 30.
If Maryland's Evergreen Health Cooperative Inc. has to make an expected payment of $22 million in risk adjustment for 2015, “We're dead,” Chief Executive Officer Peter Beilenson told Bloomberg BNA. The $22 million payment for the CO-OP, which had 30,000 members at the end of 2015, would be 26.5 percent of the almost $80 million it collected in premiums that year, “which is insane,” he said.
Evergreen made risk adjustment payments of about $2 million for 2014, a year when it had only about 2,000 members until the last few months, Beilenson said.
Based on Maryland insurance company filings, all of Evergreen's $22 million expected 2015 risk adjustment payments as well as the estimated 2015 payments from all other Maryland insurers will be paid to CareFirst BlueCross BlueShield, Beilenson said. CareFirst BlueCross BlueShield declined Bloomberg BNA's request for comment.
Evergreen and Maryland Insurance Commissioner Al Redmer Jr. have made several proposals to the CMS for temporarily changing the risk adjustment program until 2018, when the CMS has said it is likely to make changes to the program. “Every one so far has been shot down,” Beilenson said. CMS has said 2018 is the earliest time it could make major changes to the program.
“They [the CMS] have been absolutely intransigent and are clinging to this flawed formula, which will lead to the demise of most CO-OPs” as well as other small entrants into the health insurance market, Beilenson said. That would reduce competition and likely lead to greater premium increases shortly before the presidential election in November, he said. “It makes no sense.”
Beilenson said Evergreen was the most profitable CO-OP in the first four months of 2016, with $700,000 in positive cash flow that could be re-invested into the nonprofit health plan.
On May 26, Coordinated Health Mutual Inc. in Ohio went into receivership, the 13th of the 23 CO-OPs to go out of business (103 HCDR, 5/27/16). The Ohio CO-OP cited the $3.4 million it had to pay for 2014 risk adjustment and a liability of $6.2 million for expected 2015 payments as factors contributing to its failure.
Maryland Insurance Commissioner Redmer, appointed by Gov. Larry Hogan (R), told Bloomberg BNA he has had no success at getting the CMS to approve changes he thinks need to be made to keep Evergreen operating.
Redmer testified before Congress in February calling for changes to the risk adjustment program (38 HCDR, 2/26/16), and has asked whether risk adjustment payments could be delayed, modified or eliminated for a period of time. “I'm looking for any flexibility,” he said, “and at this point we have not found any.”
Redmer said he has met with Mandy Cohen, chief operating officer and chief of staff of the CMS, as well as Kevin Counihan, director of the CMS's Center for Consumer Information and Insurance Oversight and marketplace chief executive officer. “Sadly, other than having dozens of conversations, we really are in a place that was no different from a few months ago,” Redmer said.
Neither Cohen nor Counihan was available to be interviewed, CMS spokesman Aaron Albright told Bloomberg BNA.
In addition to the language included in the special enrollment interim final rule, Albright referred to other efforts the CMS has taken to address problems in the risk adjustment program, including a conference the agency held in Baltimore March 31 and a white paper (63 HCDR, 4/1/16).
The CMS's language in the special enrollment interim final rule has proved to be of little use, Paige Duhamel, health policy manager for the New Mexico Office of Superintendent of Insurance, told Bloomberg BNA.
The suggestions made in the interim final rule are applicable only if states have the authority to adjust risk transfer payments after initial payments are made, Duhamel said. “There are not a lot of states that are going to have the authority to tell one insurance company to pay another insurance company any amount of money, especially in the health and life markets,” she said.
“Our options appear to be fairly limited,” Duhamel said.
Superintendent John Franchini has called for temporarily capping payments made by insurers under the ACA's permanent risk adjustment program at 2 percent of annual premium revenue (249 HCDR, 12/30/15).
“It's unclear what latitude in practical terms CMS has actually given to states,” Tom Policelli, chief executive officer of Minuteman Health Inc., told Bloomberg BNA. For 2014, Minuteman, a CO-OP that operates in Massachusetts and New Hampshire, paid about $3.8 million in risk adjustment payments, 71 percent of the premiums it collected. For 2015, the company estimates it will have to pay as much as $17.6 million, 42 percent of its premiums, he said.
Policelli said Minuteman could withstand the expected 2015 payment, but the result is likely to be that the company has to request higher premiums for 2017. “Rate increases across the country are happening because of two things that are working together—the risk pool is not doing well [and] we're pricing out the healthy people” who don't receive enough subsidies, he said.
The risk adjustment program “tends to force the prices higher on the lowest-cost products,” because low-cost plans tend to have healthier enrollees, Policelli said. “You're left with a pool that is just going to keep getting sicker and sicker.”
Richard Foster, who was the CMS chief actuary from 1995 until 2013 and is now a consultant with Leavitt Partners working for a group of CO-OPs and provider-sponsored plans, told Bloomberg BNA that new plans are being adversely affected by the risk adjustment program.
New plans don't have medical claims data on their enrollees, and services provided during the year in which risk adjustment payments are calculated “might not carry accurate diagnoses with them,” Foster said. The CMS risk adjustment formula “depends on diagnoses,” he said.
Further, the risk adjustment formula doesn't reflect plan efficiencies, such as network discounts negotiated with providers, Foster said. Risk adjustment payments are based on statewide average premiums, and “any plan that's more efficient than average won't get credit for that. It will actually be harmed by the existing formula,” he said.
The Consumers for Health Options, Insurance Coverage in Exchanges in States, a coalition of health plans that advocates for improvements in the ACA risk adjustment program, put forward a list of proposals March 29 for changing the risk adjustment program.
To contact the reporter on this story: Sara Hansard in Washington at email@example.com
To contact the editor responsible for this story: Kendra Casey Plank at firstname.lastname@example.org
The CMS's special enrollment period and CO-OP interim final rule (CMS–9933–IFC) is at https://www.gpo.gov/fdsys/pkg/FR-2016-05-11/pdf/2016-11017.pdf.
The Consumers for Health Options, Insurance Coverage in Exchanges in States' list of proposals is at http://www.choicescoalition.org/documents/MarchWhitePaper032916.pdf.
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