Is the risk-adjustment program unfair to small insurers?

While the Affordable Care Act's risk-adjustment program is intended to make the health insurance market more competitive and fair, some argue that the policy is actually having the opposite effect, The Washington Post reports.

The risk adjustment program--part of the ACA's "three Rs" along with risk corridors and reinsurance--shifts funds from insurers with healthier members to help cover the costs of those who have sicker members. But in practice, smaller, innovative plans often end up with large bills from the government to pay into the program, while larger, entrenched plans wind up receiving funds from it, the Post says.

In Alabama, for example, nonprofit HMO carrier Viva Health had to pay $1.7 million--two-fifths of what it collected in premiums--while Blue Cross and Blue Shield of Alabama received $2.5 million, the article notes. Viva also had trouble submitting data to the Department of Health and Human Services.

In fact, three-fourths of 35 new health plans had to pay into the program for 2014, according to the recently formed National Alliance of State Health CO-OPs. More than half of the consumer operated and oriented plans that operate on the ACA exchanges have shut down, in part due to shortfalls in the risk corridor program.

The CMS has already moved to tweak the risk-adjustment program to prevent insurers from assigning risk scores that make enrollees look sicker than they are, FierceHealthPayer has reported. But while it does plan some changes, the agency defends the program overall. There's no evidence that the risk-adjustment formula is biased against small issuers, CEO Kevin Counihan told the Post, saying insurers also had plenty of time to offer feedback about the risk-adjustment program.

Still, many insurers were not prepared for how the policy would play out, Michael Adelberg, a private consultant and former HHS official, told the publication. "Some carriers brought only a knife to a gunfight," he said.

To learn more:
- read the article