The Affordable Care Act's risk adjustment and reinsurance programs are effectively compensating health plans that enroll higher-risk patients, according to a new report from the Centers for Medicare and Medicaid Services. The findings run counter to the notion that the individual health insurance market is crumbling.
CMS found that the transitional reinsurance program and the permanent risk adjustment program are "working as intended," protecting insurers against adverse selection within a state market and supporting them in offering a variety of different products.
Insurers with higher claims costs were more likely to receive risk adjustment payments and larger reinsurance payments; those with lower claims costs, meanwhile, were more likely to have to pay into the risk adjustment program.
That, the report said, is a sign the programs are working well. Yet some insurers are facing inordinately high payments into the risk adjustment program. Molina Healthcare is staring at a charge of more than $252 million; Florida-based Celtic Insurance Company stands to pay nearly $161 million. Aetna is being charged close to $90 million, Horizon Healthcare Services will pay $84 million, and New York State Catholic Health Plan is being charged more than $72 million. Kaiser Foundation Health Plan in California will pay about $183 million.
Despite that, CMS said risk adjustment transfers as a percent of premiums were similar in the 2014 and 2015 benefit years, and predictability between interim and final risk scores noticeably improved in the 2016, largely because insurers submitted higher quality data earlier in the submission process -- another sign, the agency said, that the risk adjustment program is doing well.