Maryland CO-OP sues feds over risk adjustment

Evergreen Health, Maryland’s consumer operated and oriented plan, has sued the federal government over what it says is the Affordable Care Act’s “dangerously flawed” risk adjustment program.

The complaint echoes the concerns previously raised by the CO-OP’s CEO, Peter Beilenson, M.D. He has been a vocal critic of the risk adjustment formula, arguing that it unfairly penalizes smaller, vulnerable insurers and benefits larger carriers.

Under the current formula, Evergreen Health will be required to pay approximately $22 million, or 26 percent of its $84 million in 2015 premium revenue, in risk adjustment, according to a statement from the CO-OP. But the state’s largest insurer--CareFirst BlueCross BlueShield--“will receive risk adjustment payments from most, if not all, of the state’s other insurers,” the statement says.

Thus, Evergreen’s lawsuit seeks to prevent the Centers for Medicare & Medicaid Services from collecting those payments and prod the agency to change the risk adjustment formula.

“If the system isn’t changed in the immediate future, many of the country’s most innovative and most affordable health insurance companies could very well go out of business, thus reducing competition and increasing costs for American consumers,” Beilenson says in the statement.

Beilenson previously told FierceHealthPayer that he is encouraged by a recent federal rule that essentially leaves the door open for state insurance commissioners to tweak the risk adjustment formula before 2018 to ease small insurers’ burden.

But not everyone believes that the risk adjustment program is fundamentally flawed. A report from the American Academy of Actuaries concluded that the program was generally effective, but could use a few adjustments to improve its consistency.

Other insurance companies, meanwhile, have sued the federal government over another of the “three Rs”--risk corridors--in a bid to recoup funds they say they’re owed but have not been paid due to a shortfall in collections.

To learn more:
- here’s the complaint (.pdf)
- download the CO-OP’s statement