UnitedHealth Says N.Y. PPACA risk-adjustment program could be in trouble

(Bloomberg) — UnitedHealth Group Inc. (NYSE:UNH), the largest U.S. health insurer, said its rates for public exchange plans in New York state may be too low because the failure of a competing insurer last year might lead to shortfalls in payments to the state’s risk-adjustment program.

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Drafters of the Patient Protection and Affordable Care Act (PPACA) created the risk-adjustment program in an effort to stabilize the exchange markets, by having insurers with enrollees with low health risk scores send payments to insurers with enrollees with high risk scores.

UnitedHealth set its rates for New York state based on the assumption that the risk-adjustment program would help stabilize the market, William Golden, the company’s Northeast region chief executive officer, said Wednesday at a state Senate round table in Albany.

If the loss of a participant reduces the funds available to UnitedHealth through the risk-adjustment program, the company’s rates in New York’s PPACA market may be insufficient, Golden said.

“I have rates that are substantially too low based on risk-adjustment payments not being paid,” he said in the meeting.

Others in the state’s health insurance industry also criticized the state Department of Financial Services (DFS) rate-review process.

PPACA requires either a state or federal agencies to review all requests for major medical rate increases of 10 percent or more. PPACA does not give regulators the authority to deny or change rate applications, but some states, including New York, do let regulators change the requested rates.

Paul Macielak, who runs the New York Health Plan Association, said DFS let Health Republic Insurance of New York, one of the young Consumer Operated and Oriented Plan (CO-OP) carriers, charge too little for its plans.

“Prior approval is a failed state policy,” Macielak said. “As it currently exists, it provides the superintendent with unfettered discretion to set rates.”

Generous benefits

Health Republic was charging far less than insurer HealthNow New York Inc., even though its benefits were more generous, HealthNow CEO David Anderson said, adding that regulators should have realized that the company’s collapse was likely.

“To have rates lower and costs that were higher is not sustainable,” he said at the event. “I don’t think you need to be a Harvard MBA to see that that.”

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Troy Oechsner, who helps oversee health insurers at DFS, said the regulator makes sure rates are sound and supported by actuarial calculations. He said actuaries from DFS and Milliman Inc. had examined Health Republic’s rates.

“We feel strongly that we did the right thing at the time, given the uncertainty of the market,” he said at the event.