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.
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.
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.