How CO-OPs fared in risk adjustment, reinsurance transfers

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Editor's Note: This report has been updated to add figures for additional states in which Montana Health Cooperative, CoOportunity Health and Maine Community Health Options operate.

In its latest report on risk adjustment and reinsurance, the federal government reiterates that the programs are working as intended. Yet consumer operated and oriented plans faced hefty risk adjustment charges for 2015--a fact that has led some to criticize the program.

Both programs, part of the Affordable Care Act’s “three Rs,” are intended to transfer funds from plans with low claims costs to those with higher claims costs to stabilize the marketplaces.

For 2015, individual market plan issuers in the lowest quartile of claims costs, on average, were assessed a risk adjustment charge of approximately 12 percent of total collected premiums; while issuers in the highest quartile of claims costs received a risk adjustment payment of about 11 percent of their total premiums, the report says. Issuers with higher claims costs also received larger reinsurance transfers.

There was “more dispersion” in risk adjustment transfers among small issuers than large ones, the report notes, but adds that an issuer’s claims experience was far more predictive of whether it would receive risk adjustment payment than its size.

Some have complained that the risk adjustment program adversely penalizes smaller plans, prompting Maryland CO-OP Evergreen Health to sue the Obama administration over the issue. The startup insurer owes $24.2 million in risk adjustment transfers for 2015, and is set to receive about $725,000 in reinsurance payments.

Here’s how some of the other CO-OPs fared:

  • Common Ground Healthcare Cooperative (Wisconsin): Due $32.2 million in reinsurance payments; owes $1.86 million to the risk adjustment program
  • New Mexico Health Connections: Due $5.5 million in reinsurance payments; owes $14.6 million to the risk adjustment program
  • The Montana Health Cooperative: In Montana, due $14.9 million in reinsurance payments; due $6.1 million in risk adjustment payments. In Idaho, due $7 million in reinsurance payments; owes $6.6 million to the risk adjustment program.
  • CoOportunity Health: In Iowa, due about $520,000 in reinsurance payments; owes $5.3 million to the risk adjustment program. In Nebraska, due $2 million in reinsurance payments; owes $17.2 million to the risk adjustment program.
  • HealthyCT: Due $11.4 million in reinsurance payments; owes $13.4 million to risk adjustment program
  • Maine Community Health Options: In Maine, due $41 million in reinsurance payments; owes $1 million. In New Hampshire, due $3.3M in reinsurance payments; due $1.7 million in risk adjustment payments.
  • Land of Lincoln (Illinois): Due $18 million in reinsurance payments; owes $31.8 million to risk adjustment program

The Centers for Medicare & Medicaid Services has explored changes to the risk adjustment program, though some issuers like Evergreen have said waiting until 2018 to act would be too late for some smaller insurers.

- read the report

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