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Life Health > Health Insurance

Very sick people

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Some health insurers are complaining about drug companies, substance abuse treatment clinics and other health care product and service providers trying to game the Affordable Care Act system.

Related: 3 ways Aetna just shook the ACA’s foundations

The designers of the ACA system wanted sick people to have as much access to health coverage as healthy people to do. Insurers can no longer reject applicants who need liver transplants or heart transplants. Insurers can’t even charge those applicants higher premiums.

In theory, the ACA system is supposed to make selling coverage on a guaranteed-issue basis by pushing healthy people to buy coverage, to help hold down the ratio of claims paid to premium revenue.

Insurers say drug companies are subverting efforts to keep the risk pool balanced by, for example, donating to nonprofit groups that help very sick people, and only very sick people, pay their individual health insurance premiums.

In other cases, insurers say, health care providers may be making concerted efforts to get people who are already very sick enrolled in deluxe coverage, and then, possibly, bringing those people back in for services that may not be necessary.

Officials at the U.S. Department of Health and Human Services say they will try to protect insurers by improving enforcement of ACA application rules. But HHS clearly has incentives to favor patients and providers over the people who say, “We don’t have the money to do that.”

Here’s an idea for a solution: If the ACA survives, and Congress regains the ability to function, replace the ACA risk-adjustment program with something better. Then pull other health care system players, including the health care providers, into the risk-adjustment program, to keep any of the major players from benefiting from unfair efforts to game the system.

Today, HHS bureaucrats run the risk-adjustment program. HHS could get out of the middle by having the New York Stock Exchange or Lloyds create a health insurance policy equivalent of mortgage-backed securities. Traders could value enrollee risk through free-market transactions, with transaction prices and volume information flowing automatically onto the Web.

The government should help by pumping cash into the system, when necessary, and policing insurers’ enrollee risk disclosure practices, rather than getting involved in complicated fights over exactly which diabetes drugs to consider when deciding how sick people are.

Finally, the government should also serve as the big bruiser that makes key health care system players participate in the risk-adjustment exchange.

Right now, only issuers of ACA-compliant individual and small-group policies participate in the ACA risk-adjustment program. But hospitals, physicians and drug companies also have income statements that depend partly on what happens to the medical bills of people with individual health insurance.

The risk-adjustment program helps issuers of individual and small-group health coverage that attract more than their fair share of sick people. But the program does nothing to help coverage issuers when the total number of covered people with severe health problems increases.

Hospitals, physicians and drug companies receive extra cash from insurers when more sick people get covered. But, today, the providers do nothing to compensate insurers when the number of covered people with severe health problems rises. 

The new ACA system should somehow split the extra ACA cash flowing to providers into two streams: a fixed amount per newly insured individual, and a variable amount that increases when the health care system as a whole does a good job of holding down the cost of health care.

In other words: the providers should get enough cash to provide care for the very sick people who get covered, but not enough extra cash to earn extra profits just because more very sick people get covered.

Any extra profits the providers get should come from improving sick people’s health, not from sucking the blood out of Big Gorilla Health Insurance Company Corp. when Big Gorilla Health gets stuck covering a million extra people with poorly controlled Type 2 diabetes.


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