What insurers say about enrollee risk smoothing

A complicated federal program that’s supposed to help health insurers even out the amount of health risk they assume could account for a significant share of some health insurers’ individual product revenue in 2017.

Insurers have given a few details about how they’re thinking about the Affordable Care Act (ACA) risk-adjustment program in 2017 rate filings. Many states are still keeping rate filings confidential, but a few have posted the filings on public sections of the System for Electronic Rate and Form Filing system.

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In Rhode Island, for example, actuaries for Neighborhood Health Plan of Rhode Island, a Providence, R.I.-based issuer, say that issuer expects to attract enrollees who are healthier than the market average. The carrier is estimating payments in the risk-adjustment program could increase its monthly base premium by $118.88 per month.

The total average market-adjusted index rate, or the base premium regulators and others use to compare plan premiums on an apples-to-apples basis, could be $386.84 per month. 

The net risk-adjustment amount would account for 31 percent of that total.

In Oregon, Kaiser Foundation Health Plan of the Northwest, a Kaiser Permanente unit based in Portland, Ore., is predicting it will attract enrollees who are sicker than the market average.

That company is predicting it could cut $28.66 per member per month from the risk-adjustment program. That would amount to 7.7 percent of that company’s monthly base premium.

Drafters of the ACA eliminated most of the medical underwriting rules and pricing strategies health insurers once used to defend themselves against health claim risk. The drafters added the risk-adjustment program to give individual and small-group plans with enrollees who are healthier than average a way to compensate plans that end up with enrollees who are sicker than average.

The goal was to make covering a 50-year-old with diabetes at least as attractive, from a financial perspective, as covering a healthy 25-year-old.

The Centers for Medicare & Medicaid Services (CMS) and its parent, the U.S. Department of Health and Human Services, have published only limited data about the performance of the risk-adjustment program.

Most health insurers have said little about their views about the program. Some newer, smaller insurers are asking regulators to change the rules. Those insurers say the current risk-adjustment system is unfair to plans that are too new to have much information about enrollees’ health.