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On the Third Hand: Shadowy risk corridors

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The Centers for Medicare & Medicaid Services (CMS) seems to be doing more to at least look as if it will eventually implement the Patient Protection and Affordable Care Act (PPACA) health plan “transparency” provisions.

Meanwhile, in apparently separate, but, in my opinion, closely related news, CMS is saying it has problems with the data health insurers have sent in for a complicated new risk-management program, the risk corridors program, which is supposed to shift cash from health insurers that have good underwriting results in 2014, 2015 and 2016 to insurers that have poor results in those years, to help compensate for some of the effects of PPACA market changes.

CMS officials said they were spending more time validating insurers’ risk corridors filings and might make some insurers re-do their filings. 

PPACA drafters had the idea that one way to turn consumers into better health care and health insurance shoppers was to give consumers more information about health plans.

On the one hand, lawyers, economists and others have long, complicated discussions about the effects of transparency on competition. Some argue, persuasively, that poorly designed transparency programs can increase prices, by giving sellers the information they need to work together to keep prices artificially high.

See also: Health cost witness: Transparency could backfire

On the other hand, one thing I do see as a reporter, and a patient (at least: I used to sometimes be a patient, before I ran into problems with talking to provider billing workers in an appropriate manner…), is that I have no ability whatsoever to understand what’s happening with medical bills, except, maybe, when I go to a drug store clinic or an independent urgent care clinic. As a reporter, I find that, a lot of time, getting even what is legally a public record is too difficult to be practical.

Originally, the U.S. Department of Health and Human Services (HHS) was supposed to have insurers post transparency information in 2014. They postponed implementing that requirement.

On the third hand, agents and brokers may benefit from the lousy flow of health plan information. Producers make money by bridging information flow gaps.

But, on the fourth hand, I think the situation is so bad that it keeps the public exchange system from bringing any free-market pressure to bear on the health care system.

The companies that sell stock through the New York Stock Exchange post standardized financial reports quarterly. Armies of securities analysts and credit analysts sift through the reports for signs of errors, omissions and outright fraud.

Of course, some of those companies turn out to be fictional. But that’s rare.

At the PPACA public exchange system, the publicly traded issuers post quarterly financial reports… that generally contain few details about their public exchange operations, and no details about specific plans.

Regulators in a few states post complete health insurance company rate filings too idiosyncratic and too complicated for regular people to understand. In other states, regulators post summaries or redacted filings that rarely provide clear answers to questions such as, “Just how bad were claims in 2014?”

For the most part, insurers go into a kale-filled room with their accountants and turn out the full-length versions of the rate filings. Regulators go into a kale-filled room and read the filings. They quietly come to an understanding. Or they holler at each other in public, then quietly come to an understanding.

Hardly anyone else has enough information about the plans to have an informed opinion.

If exchange plan issuers posted clear, standardized, meaningful issuer and plan performance data on a regular basis, maybe a large group of people would follow that data, come to understand it, and get an idea of what the plans’ numbers should look like.

Maybe that would improve the completeness and accuracy of the numbers, and, eventually, help consumers, employers and even brokers do a better job of understanding and buying health coverage.

And, if not, at least we’d have more to talk about.