Information available about how individual health market risk, and Affordable Care Act risk adjustment, has worked is still limited, and the results have varied so much from state to state that it’s hard to make any predictions.
The drafters of the ACA wanted people to be able to buy major medical coverage without having to go through medical underwriting. They prohibited insurers from considering personal health status when issuing individual and small-group coverage, starting in January 2014, and they prohibited insurers from using personal health information other than age, location and tobacco use when pricing coverage.
Insurers and regulators worried that sick people would converge on specific plans with great benefits and great doctors and drown those plans with big claims. To keep unexpected swings in enrollee claim risk from capsizing plans, the ACA drafters and implementers created the risk-adjustment program.
The program, based partly on risk-adjustment programs now in use in Medicare product markets, is supposed to take cash from issuers with enrollees who come in with what appear to be low risk scores, based on their medical history and other factors, and send the cash to issuers with what appear to be high risk scores.
Some insurers, and especially small, new insurers, have argued that program rules and formulas have favored large insurers.
Owen used many different methods to analyze how risk scores and ACA risk-adjustment transfers change from 2014 to 2015.