Actuaries, regulators and others have started to wrestle with a complicated packet of draft regulations that could affect how health insurers cope with the effects of the Patient Protection and Affordable Care Act (PPACA) on health claims costs.
The Centers for Medicare & Medicaid Services (CMS), an arm of the U.S. Department of Health and Human Services, developed the draft regulations, “Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2014″ (CMS-9964-P), in an effort to apply PPACA risk-adjustment provisions.
PPACA is supposed to stop health insurers from using most personal health information other than age when selling and pricing coverage starting in 2014. The law also is on track to create new subsidies and programs that are supposed to help uninsured people get coverage. The law already has banned lifetime benefits limits and is in the process of phasing in annual benefits limits.
PPACA is supposed to create three new programs — a 3-year, temporary reinsurance program; a 3-year, temporary risk corridor program; and a permanent Risk Adjustment Program — to help protect insurers against the possibility that the sickest consumers could end up flooding into certain plans and capsizing those plans.
The reinsurance and risk corridor programs would provide cash for plans that have already lost money on high-cost enrollees. The adjustment program would use modern statistical forecasting techniques to provide extra cash for plans with high-risk enrollees while the plans are covering the high-risk enrollees.
Mark Danburg-Wyld, a fellow in the Society of Actuaries and a member of the American Academy of Actuaries, wrote to CMS to say he thinks the designers of temporary reinsurance program have taken the wrong approach.
The program deductible is low and the coinsurance rate is high, Danburg-Wyld said.
The designers seem to be assuming that the biggest threat to health insurers will be catastrophic claims, Danburg-Wyld said.
“My expectation is that the risk associated with newly insured members is not for catastrophic claims, but rather for exceptionally high utilization due to pent up demand,” Danburg-Wyld said.
The big threat will come from an increase in claims in the $500 to $2,000 range, from essentially healthy people who get extra testing the first time they get an insurer-paid office visit, Danburg-Wyld said.