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Life Health > Health Insurance

ACA risk program may kill Molina exchange plans

By Allison Bell

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One of the health insurers that has been happiest with the Affordable Care Act public exchange system now says the ACA risk-adjustment program might chase it away in 2018.

Executives at Molina Healthcare Inc. talked about the pain the ACA risk-adjustment program is causing for the company Wednesday during a conference call with securities analysts.

Drafters of the ACA created the risk-adjustment program in an effort to help insurers sell individual and small-group health coverage without knowing anything about the health of the new enrollees. Insurers in the individual and small-group market are now supposed to give each enrollee a risk score. Issuers that end up with healthier-than-average enrollees are supposed to send cash to issuers that attract higher-risk enrollees.

Related: How sick is everyone? A vast PPACA tracking system takes shape

Executives at Molina, a Long Beach, California-based carrier that specializes in offering Medicaid plans and inexpensive, Medicaid-like exchange plans, said during the conference call that the risk-adjustment formula punishes issuers with low premiums, even when those issuers enroll a reasonable number of high-risk enrollees.

Because the formula worked poorly, Molina had to pay $325 million more into the program for 2016 than it expected, and it had to transfer about 24 percent of its exchange plan premium revenue to competitors in the individual health market, company executives said during the call.

The company streamed the call leave over the web, and a recording is available on its website.

Related: ACA risk adjustment eats 25 percent of Molina exchange revenue

The company held the call to go over its earnings for the fourth quarter of 2016.

The company is reporting a $91 million net loss for the quarter on $4.5 billion in revenue, compared with $30 million in net income on $3.9 billion in revenue for the fourth quarter of 2015.

The company ended the year providing administering medical coverage of all kinds for 4.2 million people, up from 3.5 million people a year earlier. Enrollment in its exchange plans increased to 526,000, from 205,000.

The company sells exchange plans in nine states. It’s reasonably happy with its plans in California, Florida and Texas, executives said during the call.

The Trump administration’s Centers for Medicare & Medicaid Services is seeking comments on draft regulations that would shorten the open enrollment period, when consumers are supposed to buy individual coverage, and tighten the eligibility screening rules for consumers who apply for permission to buy coverage through special enrollment periods outside the ordinary open enrollment period.

Dr. Joseph Mario Molina, the company’s chief executive officer, said tightening the SEP rules is important and helpful.

But, for Molina, changing the risk-adjustment transfer formula is more important, Molina said.

“We need to continue to press for some relief on the risk transfer issue,” Molina said.

Molina also talked about the federal government’s failure to provide the ACA risk corridors program benefits promised by the ACA and the U.S. Department of Health and Human Services. The ACA and HHS said the program would use cash from thriving issuers, and, possibly, other sources to help ACA exchange plan issuers that suffered low profit margins or losses in 2014, 2015 and 2016.

Because, after the ACA became law, Congress passed laws blocking HHS from using any source of funding other cash from thriving exchange plan issuers to make program payments, the program has paid only about 15 percent of the amount owed for 2014, and nothing for the amounts owed for 2015 and 2016.

If the ACA risk corridors program had worked properly, and performed its function of protecting issuers against the kinds of surprises that occured with the risk-adjustment program, Molina would have $140 million in extra cash, executives said.

Executives said Molina has sued to try to recover the $140 million in federal court. They said they are happy about a recent federal court ruling in favor of an Oregon carrier that’s trying to collect risk corridors program payments. 

Related:

Small health plans: ACA program may kill us

3 weird ways ACA lifeboat programs may affect insurers

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