Two new federal programs that are supposed to protect health insurers against upheaval related to the Patient Protection and Affordable Care Act (PPACA) may do more for the market giants than for smaller, newer players.
This possibility emerges from a LifeHealthPro.com analysis of a giant batch of PPACA reinsurance and PPACA risk-adjustment program data that the Centers for Medicare & Medicaid Services (CMS) released June 30.
PPACA revamped commercial health insurance underwriting and product design rules which started on Jan. 1, 2014. To compensate for the effects of the changes, a temporary PPACA reinsurance program is supposed to protect eligible health insurers against part of the cost of catastrophic claims filed by enrollees in 2014, 2015 and 2016.
The risk-adjustment program is supposed to shift cash from health insurers that have low-risk enrollees in PPACA-compliant individual and small-group plans to insurers with high-risk enrollees.
A third component of the “three R’s” PPACA risk-management system is a temporary risk corridors program that’s supposed to shift cash from insurers with especially good underwriting results in 2014, 2015 and 2016 to insurers that have especially poor underwriting results during those years.
CMS put preliminary reinsurance and risk-adjustment program payable and receivable estimates for 2014 in the report that came out June 30. Officials arranged the data by state and did not make any effort to provide totals for related groups of insurers.
Members of the public who wanted to look for insurers getting especially large or small amounts from the programs had to page through the report manually. CMS did not provide any revenue, enrollment or per-enrollee figures that members of the public can use to put the data in context.
CMS had one risk program application process for insurers with more comprehensive data and another process for insurers with less data. We fed the data for the issuers that used the standard application process into a spreadsheet.
We found, for example, that Blue Cross Blue Shield of Texas, a unit of Health Care Service Corp., is on track to get more PPACA reinsurance program money than any of the 481 other individually listed issuers that’s eligible to get reinsurance money through the standard application process. Texas Blue could get $549 million in reinsurance money.
Because of the way the reinsurance program is set up, every carrier in the program pays a flat fee per enrollee to participate. The median payout for an individually listed issuer that’s eligible to get reinsurance money through the standard process appears to be about $3.2 million.
In the risk adjustment program, the top recipient of PPACA risk-adjustment money could be Blue Cross and Blue Shield of Florida. The preliminary report shows it could get about $222 million in individual insurance risk-adjustment money from other carriers through the standard application process.
Because of the way the risk-adjustment program works, many plan issuers will have to pay cash into the system. Our analysis suggests that Blue Cross of California, a large unit of Anthem Inc. (NYSE:ANTM), could pay more into the program than any other individually listed issuer: about $182 million.
The top recipient of PPACA risk-adjustment money paid out in the small-group market through the standard process could be Oxford Health Insurance Inc. of New York, a unit of UnitedHealth Group Inc. (NYSE:UNH). Oxford could get $145 million in small-group risk-adjustment money for 2014. Aetna Life Insurance Company of New York could end up with the biggest small-group risk-adjustment payable: about $62 million.
We also sorted the data by issuer name, and we created subtotals for obviously related groups of carriers that appeared next to each other in the alphabetized spreadsheet, such as the group including Blue Cross and Blue Shield carriers with BCBS or Blue Cross. We added the numbers for Blue Cross of California to the Anthem totals, but we did not make special efforts to put other issuers into corporate groups. We did not create a subtotal for Health Care Service Corp., for example.
A glance at the issuer group subtotals confirms the impression we got from a quick look at the original CMS report that the reinsurance and risk-adjustment programs may send a lot more money to big insurers than to small carriers. In theory, PPACA exchange program managers wanted insurers to bring in as many young, healthy “invincibles” as possible, to hold down overall PPACA program costs and increase the percentage of Americans who have health coverage. In practice, carriers that succeeded at bringing in the young invincibles might end up facing big “payables,” or negative numbers, for the risk-adjustment program.
Next week, we’ll post per-enrollee estimates for the carrier groups. For a look at our insurer group risk program subtotal tables, read on.
See also: Feds post PPACA lifeboat program numbers
PPACA reinsurance program
|Blues (includes some Anthem units)||$2,327,596,809|
|Anthem (including Blue Cross of California)||$534,925,112|
|Blue Shield of California||$363,050,265|
|Aetna (other than Coventry)||$116,080,270|
|UnitedHealth (including Oxford and Optimum)||$89,033,399|
|Assurant (John Alden)||$2,784|
PPACA risk-adjustment program, individual market
|BCBS/Blue Cross companies||$304,373,735.29|
|Blue Shield of California||$135,212,707.60|
|UnitedHealth (including Oxford and Optimum)||$110,840,237.28|
|Aetna (other than Coventry)||$65,338,605.35|
|Assurant (John Alden)||- $162,197.22|
|Highmark (Blue)||- $1,022,421.69|
|Premera (Blue)||- $1,342,427.11|
|Centene (Celtic)||- $8,470,928.48|
|Carefirst (Blue)||- $10,170,055.86|
|Health Net||- $69,679,464|
|Anthem (including Blue Cross of California)||- $197,844,730.00|
|Coventry (Aetna)||- $239,201,054.37|
PPACA risk-adjustment program, small-group market
|UnitedHealth (including Oxford and Optimum)||$113,337,442.22|
|BCBS/Blue Cross companies||$86,079,523.72|
|Anthem (including Blue Cross of California)||$44,261,149.34|
|Blue Shield of California||$13,755,875.29|
|Assurant (Time)||- $7,336.93|
|Assurant (John Alden)||- $916,553.39|
|Premera (Blue)||- $7,630,241.94|
|Carefirst (Blue)||- $12,720,249.63|
|Coventry (Aetna)||- $17,713,016.65|
|Aetna (other than Coventry)||- $178,638,575.49|