Implementing Health Reform. On November 19, 2015, the Centers for Medicare and Medicaid Services (CMS) released national and insurer level data on the results of the 2014 medical loss ratio program and insurer level data on the results of the 2014 risk corridor program. CMS also released a guidance reaffirming its commitment to full payment of all risk corridor obligations for 2014.
The Affordable Care Act (ACA) requires insurers in the individual and small group market to pay out at least 80 percent of their premium income (after adjustments) for health care claims and health care quality improvement expenses or to rebate the difference between their actual "medical loss ratio" and 80 percent of their adjusted premiums to their consumers. In the large group market the target is 85 percent. The calculation, which was quite complex to begin with, has become increasingly complicated over the years as it is now must take into account payments and receipts from the reinsurance, risk adjustment, and risk corridor programs and is as of 2014 based on a three-year average rather than a single year's results.
For 2014, health plans paid out a total of $470 million in refunds to total of 3.7 million enrollees representing 5.5 million consumers. Refunds amounted to $238 million in the individual market, $140 million in the small group market, and $91 million in the large group market. Refunds per family that received a refund averaged $139 in the individual market, $134 in the small group market, and $102 in the large group market. The percentage of consumers in the individual market who are now covered by insurers that are meeting the medical loss ratio target is 85.9 percent, compared to 62.3 percent in 2011. Indeed, a recent study found that medical loss ratios across all insurers in the individual market equaled 92 percent for 2014 and in ten states and the District of Columbia, average medical loss ratios in the individual market exceeded 100 percent. Across the market, it seems that some insurers are still making significant profits but that others are losing money.
The risk corridor program is supposed to move money from qualified health plan (QHP) insurers that have excessive premium income relative to claims to QHP insurers that have excessive claims relative to premium income. On October 1, 2015, CMS announced that it would have only $362 million in contributions to pay out $2.87 billion in requested payments, and so would only pay out 12.6 cents on the dollar for payment claims at this time. This decision was necessitated by the fact that Congress limited payments under the program for 2014 to the contributions collected under the program under the 2015 Cromnibus appropriations bill.
The devastating effect of this decision, particularly on the health insurance cooperatives, is illustrated dramatically in the data released on November 19. The Colorado CO-OP, for example, recovered about $184,000 on nearly $16 million in risk corridor claims. The Kentucky CO-OP recovered only $9.7 million of $77 million in claims. CoOpportunity received about $7 million on $66 million in claims in Iowa and about $9 million on $74 million in claims in Nebraska. The New York Freelancers CO-OP received about $19 million on $150 million in claims.
UnitedHealth Group, which announced on November 19 that it was scaling back its marketing of individual marketplace products for 2016 and might exit entirely for 2017, only participated in the individual market in one state in 2014 and there paid into the risk corridor program. In the small group market, where it did participate in several marketplaces, United lost less than $1,000 through the risk corridor underpayments nationwide and again paid into the program in several states, indicating that its participation was quite profitable. Whatever may be United's concerns with the marketplaces, underpayment from the risk corridor program for 2014 was not one of them.
The November 19 guidance reaffirmed what CMS has been saying all along — that it understands that the ACA requires the government to make full payment of all 2014 risk corridor obligations. The Department of Health and Human Services (HHS) will make up 2014 shortfalls from 2015 or 2016 collections if possible and if not will "explore other sources of funding for risk corridors, subject to the availability of appropriations. This includes working with Congress on the necessary funding for outstanding risk corridors payments."
The ACA is indeed quite clear on this obligation, but how insurers will be able to collect on it other than through a lawsuit in the Court of Claims is far from clear. The guidance is no doubt intended to quiet fears that the government might default on this obligation, but it is unlikely to have accomplished this end.
from Health Affairs Blog http://ift.tt/1QyAZYx
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