CO-OP exec: Risk-adjustment issues threaten core of health reform

Federal regulators' refusal to amend the risk-adjustment program threatens not only the viability of small insurers, but also the survival of the Affordable Care Act itself, the CEO of a consumer operated and oriented plan (CO-OP) wrote in an opinion piece for the Baltimore Sun.

The risk adjustment program, part of the ACA's "three Rs," essentially shifts funds from insurers with healthier members to help cover the costs of those who have sicker and more costly members. But recently some have begun to question its efficacy, noting that many smaller, nonprofit insurers get stuck with large government bills while larger, legacy carriers receive windfalls.

In fact, the National Alliance of State Health CO-OPs pointed out that three-fourths of 35 new health plans had to pay into the program for 2014, FierceHealthPayer has reported.

But the Centers for Medicare & Medicaid Services (CMS) has not taken steps to fix the problems with the risk adjustment program, writes Dr. Peter Beilenson, the CEO of Maryland CO-OP Evergreen Health and a former Baltimore City health commissioner. This hurts CO-OPS--many of which have experienced financial troubles and shut down--as well as other new insurers, which goes against the ACA's goal of encouraging more competition in the health insurance marketplace, he says.

The erosion of competition is likely to drive premiums higher, pricing younger and healthier consumers out of the market and forcing insurers to raise premiums even more to cover the cost of a sicker risk pool, he adds.

The best way forward, Beilenson argues, is for CMS to limit the percentage of risk adjustment payments that insurers must make to no more than 2 percent of the carrier's premium for the year. "This action would avert significant financial damage to the small insurance carriers that are so important to the success of the ACA," he writes.  

Another of the three Rs--the risk corridor program--has also become a pain point for smaller insurers and CO-OPs. The program paid out only 12.6 of what it owed insurers for the 2014 benefit year, and shortfalls are expected to continue.

To learn more:
- read the opinion piece