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Insurers guess about PPACA risk programs

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Carriers are starting to build big new federal risk-management programs into premiums.

Units of Aetna, Health Net and UnitedHealth talk about the Patient Protection and Affordable Care Act three Rs programs in California filings for small-group rate changes that could take effect as early as July 1.

Aetna told the California Department of Insurance it intends to lower rates for plans with 70,780 enrollees an average of 7.54 percent.

Health Net would increase rates for 8,144 policyholders by 3.9 percent. 

UnitedHealth could increase rates for a new policy with no policyholders an average of 1.9 percent.

The PPACA three Rs programs include a reinsurance program, which is supposed to protect eligible plans against the risk that individual enrollees will have huge claims; a risk-adjustment program, which is supposed to provide subsidies while the plan year is still under way for plans that cover high-risk enrollees; and a risk corridors program, which is supposed to use money from plans with good claims experience to help plans with poor experience.

Health Net is the only company that mentions the risk corridors program in the new California rate filings.

Bryan Curley, a Health Net actuary, notes in a letter certifying the filing that the risk corridors could absorb a large portion of any morbidity adjustments that result from PPACA-related market changes.

All three carriers talk about the reinsurance and risk-adjustment programs.

Aetna and Health Net assume in their filings that the effect of the risk-adjustment program will be neutral.

“We expect that we will have members enrolled at approximately the market morbidity,” Aetna says.

UnitedHealth says it’s assuming its membership will be at the state average risk level because it has too little data to know how its risk will compare with the state average.

In California, small group carriers will help pay for the PPACA reinsurance program with an assessment of $5.25 per member per month, but, because of the way the state’s health insurance risk pool is set up, the reinsurance program won’t provide any protection for small group carriers.

Aetna, Health Net and UnitedHealth all include the reinsurance assessment in their rate filings and assume recoveries from the reinsurance program will be zero.

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