On the Third Hand: Scoring

In 18 months, I’ll probably be writing a lot of articles about various states and health insurers screaming bloody murder about the Patient Protection and Affordable Care Act of 2010 (PPACA) risk-management programs.

Starting in 2014, insurers and their regulators are supposed to use three complicated PPACA risk-management programs to adjust for the reality that some insurers will probably end up enrolling sicker people than others. The insurers with the lower-risk young invincible enrollees are supposed to compensate the insurers who somehow end up with enrollees recently exhumed from their states’ creepier graveyards.

The U.S. Governmental Accountability Office (GAO) has disguised a report about why running this risk-management program is probably going to be hard as a mild-mannered report about the accuracy of risk-scoring at Medicare Advantage plans.

PPACA is, really, sort of turning the individual and small group health insurance markets into a complicated new version of the Medicare Advantage program.

The Centers for Medicare & Medicaid Services already has a risk-scoring program that it tries to use to compensate the Medicare Advantage plans with the riskier enrollees.

But, surprise! In real life, once health insurers know that, in this situation, having riskier enrollees is a good thing, not a bad thing, the enrollees start looking riskier. The GAO found that the Medicare Advantage plan risk scores have ended up being about 4 percent to 6 percent higher than the GAO would have expected if the plan enrollees had stayed in the traditional Medicare program.