Sicker people’s tendency to choose some health insurers’ individual plans over others is so strong, and so hard to predict, that some big health insurers are facing huge Affordable Care Act risk-adjustment bills for 2016.

Aetna Inc., for example, might have to pay about $29 per month per individual major medical enrollee, or a total of $375 million, into the ACA risk-adjustment program for 2016, because its enrollees looked so much healthier than the market average, according to data from analysts at Mark Farrah Associates.

Kaiser Permanente, a big managed care company, might have to pay an average of about $32 per month per enrollee, or a total of $355 million, into the program because of its own enrollees’ lack of obvious chronic conditions.

(Related: ACA Risk-Adjustment Program Chokes Remaining ACA CO-OPs

Other issuers, including GuideWell, the parent of Blue Cross and Blue Shield of Florida, and Blue Shield of California, seem to be attracting a flood of sick enrollees.

GuideWell could collect $45 per individual major medical enrollee for the risk-adjustment program for 2016.

California Blue could collect $30 per month.

Analysts at the Centers for Medicare and Medicaid Services, the arm of the U.S. Department of Human Services that runs the program, estimated in June, when they released the full 2016 ACA reinsurance and ACA risk-adjustment report, that the average 2016 monthly premium was $392 per month.

Mark Farrah reports show that Aetna averaged about $302 per month per enrollee in 2016, and that GuideWell averaged about $412. Those figures mean that Aetna might pay about 10% of its 2016 individual major medical revenue into the program, and GuideWell might be counting on getting payments equal to more than 10% of its premium revenue from the program.

ACA Risk-Adjustment Basics

Drafters of the Affordable Care Act imposed many new benefits requirements on issuers of individual and small group coverage, and they banned most of the underwriting rules and strategies insurers once used to protect themselves from medical claim risk.

Maria Vullo (Photo: NYDFS)

Maria Vullo (Photo: NYDFS)

To help coverage issuers protect themselves from taking on more than their fair share of enrollee health risk, the ACA drafts created the risk-adjustment program.

All issuers of individual or small-group major medical coverage written under the ACA rules that took effect in 2014 are supposed to participate in the program. All enrollees get health risk scores, based on their medical history. Issuers that end up with low-scoring enrollees are supposed to send cash to issuers with high-scoring enrollees.

Some smaller, newer issuers, including the managers of the nonprofit, member-owned Consumer Operated and Oriented Plans, have argued that the current risk-adjustment formula favors issuers that charge higher premiums over issuers with lower premiums.

Issuers have also argued that the system favors older, bigger plans that have more information about their enrollees, and issuers that put more work into assigning enrollees condition codes.

Big Revenue Shifts

Although health coverage issuers may prefer to see big risk-adjustment program receivables, rather than big risk-adjustment bills, big program receivables can create big headaches, too: Issuers have no way to know whether the competitors that are supposed to pay into the program will actually make their payments.

Officials at CMS argued in the June report that their data show that, overall, the program seems to be working properly, and that the risk-adjustment program payment flows appear to reflect actual differences in plans’ enrollee risk levels.

Maria Vullo, the New York state insurance superintendent, has responded to issuer concerns about the program by requiring companies that get risk-adjustment payments for 2017 to put 30% of that cash into a stabilization fund, to help issuers that may face financial problems as a result of the risk-adjustment program.

President Donald Trump and Republicans in Congress have been trying to change the Affordable Care Act, but many of the Republican proposals would keep the ACA risk-adjustment program, or replace the program with new state-run stabilization funding. Officials at CMS are going to hold regular webinars to help health coverage issuers feed data into the program and understand the data coming out of the program.

— Read New ACA Risk Report Hits Some Health Insurers With Huge Bills on ThinkAdvisor.


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