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ACA risk adjustments create risk

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Under ACA, companies are being penalized for growth, perverse incentives abound and risk adjustments are creating … risk!

This week, Tom Policelli, CEO of Minuteman Health, joins us to discuss the unintended consequences of risk adjustment in the Affordable Care Act. Although it may not have crossed your radar yet, it’s important to understand the market uncertainty triggered by the federal government’s risk adjustment mechanisms and how that will impact advisors and the clients they serve.

Tom walks us through the three Rs established by the ACA: Risk adjustment, Reinsurance and Risk corridor. While these were developed to foster market stabilization, we discuss how each program is actually producing the reverse effect — sometimes with disastrous consequences.

Tom also talks about his work with the advocacy group Choices Coalition, which is having some success bringing an awareness to the industry problems created by the ACA. He covers the practical solutions that have been proposed and the strategies some organizations are undertaking to address the little-known perverse incentives created by risk adjustment.

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