CMS will propose rule to modify Obamacare risk adjustment program
All insurers would pay a small amount to help ACA marketplace issuers with large claim costs.
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In future rulemaking, the Centers for Medicare and Medicaid Services will propose that all issuers fund a small payment to the risk adjustment program to help marketplace insurers with high claims costs.
The fund would help absorb some of the cost for claims above a certain threshold, say $2 million, said Kevin Counihan, CEO of the Health Insurance Marketplace in a blog released Thursday.
"This type of risk sharing would reduce uncertainty for issuers who are not yet able to reliably predict the prevalence and nature of high-cost cases in their Marketplace business, while also protecting access to robust coverage options for people with very high-cost conditions," Counihan said.
The rule would modify the Affordable Care Act's permanent risk adjustment program to adjust for the highest-cost enrollees and their actuarial risk, which would achieve some of the same risk-sharing benefits as the reinsurance program, he said.
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"Because high-cost enrollees and events are rare, they create disproportionate uncertainty in setting health insurance premiums: it is hard for any given issuer to predict how many people with very high-cost conditions will enroll, or how many expensive but unusual events will occur," he said.
CMS has attempted to buffer issuer risk in the ACA marketplace and boost enrollment through its risk adjustment and reinsurance programs.
The ACA's risk adjustment program distributes the costs of sicker, more expensive enrollees, and CMS data shows the program has worked as intended in its first two years, Counihan said.
However, the current risk adjustment methodology cannot easily adjust for certain high-cost enrollees, he said.
The three-year, transitional reinsurance program reduces premiums for consumers and lessen insurers' incentives to discourage enrollment by people with high-cost conditions, he said.
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New CMS data shows that per-enrollee costs in the ACA individual market are essentially unchanged from 2014 to 2015, falling by 0.1 percent, even as per-enrollee costs in the broader health insurance market grew by at least 3 percent, Counihan said.
This finding suggests a year-over-year improvement in the ACA individual risk pool, with the marketplaces gaining healthier, lower-cost consumers as it expanded, he said.
Marketplace premiums for 2016 are between 12 and 20 percent below what the Congressional Budget Office initially predicted.
For these reasons, CMS is exploring options to modify the ACA's permanent risk adjustment program to better adjust for the highest-cost enrollees and their actuarial risk, which would achieve some of the same risk-sharing benefits as the reinsurance program, he said.
Twitter: @SusanJMorse
