Molina Healthcare CEO the latest to slam risk adjustment's effect on payers

Document titled "Patient Protection and Affordable Care Act"

The risk adjustment program of the Affordable Care Act continues to come under fire from smaller payers that say the premium stabilization program unfairly pads the pockets of the major insurers while hurting small insurers.

The rich get richer and the poor get poorer among payers as a consequence of the risk adjustment program, Molina Healthcare CEO Mario Molina told CaliforniaHealthLine. Specifically, the Long Beach, California-based company’s CEO says Blue Cross Blue Shield plans derive the greatest benefit from the program’s compensation of insurers that enroll sicker, costlier members.

Florida Blue and Blue Shield of California together received more than $1 billion alone, and seven of the top 10 recipients of risk adjustment funds were Blues plans, the article notes.

“That [Florida Blue] CEO should be sending me fruit baskets,” says Molina, whose company has proved to be one of the more successful health plans on the ACA exchanges.

Blue Shield of California, however, said the the risk adjustment formula is independent from administrative expenses and doesn’t reward inefficiency, according to CaliforniaHealthLine

Aetna, for its part, also said the current model has skewed incentives and rewards inefficient health plans, according to the article.

Molina’s concerns echo Evergreen Health’s CEO Peter Beilenson’s critique of the risk adjustment formula: He has said it unduly imposes financial burdens on smaller, more financially vulnerable payers. The risk adjustment program required Evergreen to pay $23 million for 2015 benefits year, an expense without which the payer would have been $2 or $3 million in the black last year, FierceHealthPayer has reported. Evergreen has sued the Centers for Medicare & Medicaid Services, alleging the current risk adjustment system threatened the sustainability of innovative health insurers that promote competition and reduce medical costs for consumers. 

Beilenson’s organization announced earlier this month that its board agreed to take the company private, abandoning the non-profit consumer operated and oriented plan model.

Meanwhile, in regard to the other two of the "three Rs"--risk corridors and reinsurance--America's Health Plans CEO Marilyn Tavenner says Congress should either act now to settle risk corridor shortfalls or let the Justice Department settle the disputes without interfering, according to Morning Consult. Tavenner also advocated extending the programs to allow payers to recover losses from the first few years of exchange volatility. She added that claims that the exchanges are in a death spiral are overblown, saying, "I do think they're unstable, and we have a responsibility to stabilize them. That's on all of us."