The Affordable Care Act risk-adjustment program is working so poorly that it’s pushing individuals and small groups that have alternatives out of the ACA-compliant coverage market, according to Mark Bertolini.
The ACA now requires insurers to sell individual and small-group health coverage on a guaranteed-issue basis, without shutting out sick people or charging them more for coverage. The ACA risk-adjustment program is supposed to help keep the issuers from ending up with more than their fair share of sick people. Program managers are supposed to use cash from carriers with healthier enrollees to help carriers with sicker enrollees.
Bertolini, the chairman of Aetna, said today during a conference call with securities analysts that, because of market design flaws, the average price of ACA-compliant individual and small-group coverage is about 10 percent to 15 percent below where it needs to be for the participating issuers to break even.
Because of that, once the risk-adjustment program managers collect the collectibles and pay out the payables, “everybody loses the same amount of money,” Bertolini said.
The program now shifts cash from issuers that are losing some money to issuers who are losing more money, Bertolini said.
Until managers change the system, “we’re going to find ourselves in a premium spiral that’s going to continue to drive rates up, and good risk out, and ultimately create a very bad risk pool,” Bertolini said.
Bertolini was describing a “death spiral,” or situation in which insurance market design flaws create a self-perpetuating cycle of premium increases and market shrinkage.
Bertolini gave his assessment of ACA market conditions while he and other Aetna executives discussed third-quarter earnings.
Aetna losing $335 per enrollee
The Hartford-based health insurance giant reported $604 million in net income for the quarter on $16 billion in revenue, up from $560 million in net income on $15 billion in revenue for the third quarter of 2015.