Individual Health Members Looked a Bit Riskier in 2016: Feds

The members of Congress who wrote the ACA added the risk-adjustment program to help insurers cope with ACA rules that took effect in January 2014.

Before January 2014, health insurers in most states could protect themselves from high medical claims by shutting out people with health problems, or charging people with health premiums higher premiums. Insurers could also adjust benefits to hold down claims.

The ACA eliminated most of those defenses. The ACA drafters did try to protect insurers from taking on more than their fair share of health risk by developing three risk management programs.

A temporary ACA risk corridors programs was supposed to use cash from ACA exchange plan issuers that did well in 2014, 2015 and 2016 to provide cash to help exchange plan issuers that did poorly in those years. That program has collected enough cash from thriving issuers to pay only a small portion of what it owes for 2014.

A second program, a temporary ACA reinsurance program, used a broad fee imposed on all commercial coverage issuers to compensate issuers of ACA-compliant individual major medical coverage for catastrophic individual health claims that arrived in 2014, 2015 and 2016. That program apparently has paid most of what it was supposed to pay for 2014 and 2015.

The third program, the ACA risk-adjustment program, is supposed to be a permanent program. Participating insurers use age information, claim information and other information to give each enrollee a health risk score. Issuers in the individual and small-group market with lower-than-average risk scores must pay cash into the program, and issuers with higher-than-average risk scores get cash out.

The ACA risk-adjustment program is similar in some ways to an older risk-adjustment program in use in the Medicare Advantage market.

CMS has already been making risk-adjustment program payments, but it is still tinkering with that program. Some insurers have argued that the adjustment formula program managers use discriminates against plans with unusually low average premiums, and against new, rapidly growing plans with little information about their enrollees.

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