CMS data released June 30 show that the Affordable Care Act's (ACA) reinsurance and risk adjustment programs have been effective "in compensating plans that enrolled higher-risk individuals," but that small health insurers and cooperative health plans continue to owe the federal government large sums.
The data detail reinsurance and risk-adjustment payments that CMS intends to make to and collect from the 767 insurers that successfully submitted data for the programs during the 2016 benefit year. Insurers can participate in both programs. According to CMS, 751 insurers submitted data under the risk-adjustment program, while 496 insurers submitted data under the reinsurance program.
The reinsurance program was temporary and ended after 2016. Under the reinsurance program, insurers paid into a pool that could be used to reimburse them if they incurred claims that exceeded a certain threshold.
The risk-adjustment program is a permanent program created under the ACA that redistributes funds from various plans with lower-risk enrollees to those with higher-risk enrollees in an effort to encourage insurers to enroll a balance of healthy and sick consumers.
Several co-ops and small health insurers Sixteen co-ops have shut down or announced their closures since their launch in 2014. Several co-ops and small health insurers have criticized the program's formula for calculating payments insurers owe to the federal government. And some of the co-ops have cited lower-than-expected risk corridors payments, as well as money they owe the federal government under other ACA programs, as reasons for their decisions to close. Several have filed lawsuits against the federal government over the risk-adjustment program.
"Surprisingly, CMS reports that risk scores remained stable in the individual market and decreased in the small group market," writes Tim Jost for Health Affairs. "The data also would seem to refute the commonly held belief that the marketplace population is becoming sicker."
Overall, CMS said the data show the programs "are working as intended in compensating plans that enrolled higher-risk individuals." For example, the report showed insurers with higher claims costs were more likely to receive risk-adjustment payments and to receive larger reinsurance payments, while those with lower claims costs were more likely to pay into the risk-adjustment program.
CMS said 445 insurers will receive reinsurance payments for ACA plans sold in 2016 totaling $4 billion.
Blue Cross and Blue Shield of Florida will receive the largest amount under the programs, totaling $615.7 million in risk-adjustment and reinsurance payments. Other insurers receiving large risk-adjustment and reinsurance payments include:
- Blue Shield of California, which will receive $572 million;
- Anthem Blue Cross of California, which will receive $476.3 million; and
- Blue Cross and Blue Shield of North Carolina, which will receive $264.6 million.
However, several other large health plans will owe money under the programs:
- Kaiser Foundation Health Plan is set to receive $99.5 million in reinsurance payments, but must pay CMS $437.8 million risk-adjustment payments; and
- New Hyde Park, an insurer run by Northwell Health, is set to receive $6.3 million in reinsurance payments, but must pay CMS $131.8 million in risk-adjustment payments.
The data also show co-ops continue to pay large amounts under the programs. For example, for the 2016 benefit year:
- Minuteman Health of Massachusetts is set to receive $2.7 million in reinsurance payments, but must pay CMS $25.4 million in risk-adjustment payments;
- Evergreen Health Cooperative is set to receive $2.5 million in reinsurance payments, but must pay CMS $9.4 million in risk-adjustment payments; and
- Illinois' shuttered Land of Lincoln Health is set to receive $9.2 million in reinsurance payments but must pay CMS $21.7 million in risk-adjustment payments.
According to the report, the reinsurance program reduced net claim costs by around 10 to 14 percent in 2014, 6 to 11 percent in 2015, and 4 to 6 percent in 2016. According to Jost, "The end of the reinsurance program after 2016 has been a major driver of premium increases for 2017 and 2018" (Livingston, Modern Healthcare, 7/5; Small, FierceHealthcare, 7/5; Jost, Health Affairs, 7/1; CMS data, 6/30).
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