A new federal rule amending portions of the Affordable Care Act contains a paragraph that those who have pushed for changes to the risk adjustment formula find "very encouraging," the CEO of insurer Evergreen Health tells FierceHealthPayer.
In the rule--which adjusts the regulations for special enrollment periods and consumer operated and oriented plans (CO-OPs)--the Centers for Medicare & Medicaid Services (CMS) indicates that it is "sympathetic" to the concerns some insurers have expressed about the risk adjustment program and is exploring changes to address them.
Some insurers, including the remaining CO-OPs, have argued the formula is flawed because it has resulted in smaller health plans paying large proportions of their premium collections into the program, while larger payers reap the benefits. One of the more vocal critics has been Peter Beilenson, M.D., the top executive of Maryland's CO-OP, who has said the program threatens the viability of smaller health plans.
"Everyone admits, even CMS admits, that the risk adjustment process and formula is flawed and that there have got to be changes made," Beilenson (right) tells FierceHealthPayer in an exclusive interview.
But while he predicts federal officials will make many of the changes industry stakeholders have requested by 2018, he argues that if no alterations have occurred by then, it is "going to be too late for a lot of small carriers."
Thus, he is pleased with CMS' new rule, in which the agency says it encourages states "to examine whether any local approaches, under state legal authority, are warranted to help ease this transition to new health insurance markets."
In Maryland and elsewhere, that leaves the door open for insurance commissioners to step in and tweak the risk adjustment formula before 2018. "Basically, state law generally allows them to do what they need to do to regulate the marketplace to keep it stable and consumer-friendly," Beilenson says.
State regulators could either impose a cap that limits the percentage of risk adjustment payments that insurers must make to no more than 2 percent of the carrier's premium collections for the year, or a redistribution of funds after the risk assessment is done. The latter, Beilenson says, is "just a more complicated way of doing a cap" but could be a viable option if CMS indicates that approach is the most in line with its regulations.
Come 2018, Beilenson says some steps CMS can take to further improve the program are to include pharmacy data in risk scoring and account for late-in-the-year enrollees who are difficult to score if they don't see a doctor right away.
An April report from the American Academy of Actuaries called for similar changes in the risk adjustment model, though it said the program in generally has been a success. Indeed, a chief actuary for the Covered California exchange has argued insurers shouldn't get a "free pass" to get out of participating in the program, saying this could lead them to avoid covering sicker individuals.
But Beilenson says he hasn't seen any public pushback from larger insurers regarding changes to the risk adjustment program, as payments and collections from the program account for such a small proportion of their overall revenue. Yet for smaller plans, much more is at stake if changes aren't made before 2018. Thus, he says, "we're very, very pleased that the advocacy seems to have worked."
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