Health Affairs Web First: ACA Risk Adjustment And Reinsurance Were Well Targeted In First Two Years

Under the Affordable Care Act (ACA) insurers are barred from varying their coverage offers based on an applicant’s health status. In an effort to make the costs of enrolling both healthy and sick people equivalent for health plans, the ACA established a risk adjustment program in 2014.

A new study, released by Health Affairs as a Web First, examined results from the 2014 and 2015 risk adjustment and reinsurance programs for ACA-compliant individual market plans, to evaluate how risk adjustment and reinsurance transfers varied across insurers and to assess how these program payments compared across insurers given their level of per enrollee claims costs. According to the authors Paul D. Jacobs, Michael L. Cohen, and Patricia Keenan,  for the 30 percent of insurers with the highest claims in 2014 and 2015, before risk adjustment, claims—excluding administrative expenses—exceeded premium revenues by $90–$397 per enrollee per month. After revenues from risk adjustment and reinsurance were incorporated, this effect was reversed, with revenues exceeding claims by as much as $49 per enrollee per month.

To obtain their results, the authors analyzed insurer-level data in each state collected by the Centers for Medicare and Medicaid Services (CMS). “The risk adjustment and reinsurance programs were relatively well targeted in the first two years,” the authors concluded. “While there is ongoing discussion regarding the future of the ACA, our findings can shed light on how risk-sharing programs can address risk selection among insurers—a pervasive issue in all health insurance markets.”

Jacobs and Keenan are affiliated with the Agency for Healthcare Research and Quality; Cohen is with the Centers for Medicare and Medicaid Services.

This study will also appear in Health Affairs’s April issue.

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