Small insurers in Massachusetts upset over risk adjustment program

Small health insurers in Massachusetts worry that a provision in the Affordable Care Act will force them to subsidize the state's dominant insurer, Blue Cross Blue Shield, reported the Boston Globe.

The ACA mandates that states redistribute income among insurers. Those with more healthy members pay into a state-run pool, while those with sicker, costlier patients receive payments from that pool.

Critics who oppose the risk adjustment program believe it's a bailout, but supporters praise the program as a way to keep premiums in check, FierceHealthPayer previously reported.

The Massachusetts Association of Health Plans--which Blue Cross is not a part of--claims that the state is using flawed data to determine which members are most costly. This ultimately threatens the future of many small insurers, according to the Globe.

"The way the methodology works, it in effect penalizes anybody who's newer and smaller," Thomas D. Policelli, chief executive of Minuteman Health, told the Globe. Minuteman is a newer company that attracts younger, healthier members; based on latest calculations, the insurer may have to pay 25 percent of its premium income into the pool.

Fallon Community Health Plan calculated that it will pay millions into the pool--because of the quality of the data and not its member population, W. Patrick Hughes, president and chief executive of Fallon, told the Globe. "The risk adjustment is penalizing health plans that have done the most to help members get healthy and stay healthy," Hughes added.

The nine members of the Massachusetts Association of Health Plans expect to pay a total of $82.5 million this year. The majority will most likely go to Blue Cross.

Blue Cross, however, believes the federal requirement "levels the playing field" in the market by allowing insurers to design plans targeting healthier and less-costly patients, noted the Globe. As of Sept. 30, 2014, Blue Cross anticipated a $30 million payment. The company had lost $142 million in the first three quarters of 2014.

For more:
- here's the Boston Globe article