State Official to Seek Cap on ACA Risk Adjustment Payments
Bloomberg BNA
By Sara Hansard | February 24, 2016 6:57PM ET
Feb. 24 (BNA) -- Maryland's insurance commissioner told Bloomberg BNA Feb. 24 he'll look at ways to help nonprofit CO-OPs created under the ACA and other new plans remain viable under the law's risk-sharing programs.
Al Redmer Jr., the state insurance commissioner and a Republican, will testify Feb. 25 before a House panel on the failure of 12 of the 23 government-funded CO-OPs. Redmer told Bloomberg BNA he'd like to see a new cap on the risk adjustment payments certain insurers, including CO-OPs, must make.
The chief of staff of the Centers for Medicare & Medicaid Services also is scheduled to testify at the House Oversight and Government Reform health subcommittee hearing on the viability of the CO-OPs and factors leading to the failures.
Many health-care industry analysts have said the problems with CO-OPs primarily stem from their underpricing plans in an attempt to gain market share in the early years of the ACA marketplaces, while Democrats argue that Republican efforts to underfund ACA risk management programs contributed to the failures.
CO-OPs Awarded $2.4B in Loans
The CMS has awarded $2.4 billion in loans to fund the 23 Consumer Operated and Oriented Plans, and loans to the 12 failed CO-OPs, in which about 740,000 people were enrolled, total over $1.2 billion. Over half of the 11 remaining CO-OPs are on enhanced oversight or corrective action plans.
Redmer endorsed a proposal made by CO-OPs and other new, small ACA plans under which risk adjustment payments would be capped at 2 percent of premiums at least for the 2015 plan year and possibly for the 2016 plan year . The insurance superintendent of New Mexico has also endorsed the plan.
But if the federal government doesn't adopt the proposal, “We're looking for any creative solution we could find” that Maryland regulators could implement, Redmer said. Maryland is surveying carriers doing business in the state to find out how much they expect to pay into or receive from the ACA risk adjustment program for 2015, he said.
Risk Adjustment Program
The risk adjustment program was intended to protect companies that cover sicker-than-average enrollee populations, but CO-OPs and other small new plans sold through the ACA marketplaces were hard hit with payments under the program for 2014 .
Redmer said he believes there are problems with the program for new companies, which don't have the infrastructure or claims history to accumulate the data needed to justify receiving payments. The CMS is planning to hold a conference on the program at its Baltimore headquarters March 31.
But established carriers that received big payments under the program, notably Blue Cross Blue Shield plans, argue that capping the payments will undermine the program's goal of protecting insurers that cover sicker-than-average enrollees. Under the ACA insurers are prohibited from denying coverage or charging more to people who have health problems.
Rep. Jim Jordan (R-Ohio), chairman of the House Oversight and Government Reform Subcommittee on Health Care, Benefits and Administrative Rules, told Bloomberg BNA Feb. 24 that the Feb. 25 hearing will underscore “how pathetic this CO-OP program has been,” and the failures of the ACA.
The hearing will also focus on the criteria of the corrective action plans taken by the CMS, some of which were put in place after the CO-OPs in question indicated they were having serious financial problems, Jordan said. “This model's not working,” he said.
Substitute for Public Option
The CO-OPs were added to the ACA law as a substitute for the so-called public option, under which a government-run plan would compete in the ACA exchanges.
The CO-OP program was intended to provide more competition in the ACA marketplaces, Rep. Matt Cartwright (D-Pa.), ranking member of the subcommittee, told Bloomberg BNA Feb. 24. “Everywhere the CO-OPs have existed they put pressure on prices,” he said. “There's a success story here. We're talking about over 1 million people in our country who are insured by CO-OPs.”
Payments by the federal government in 2015 of only $362 million for insurer claims of nearly $2.9 billion under the ACA risk corridors premium stabilization program also hurt the CO-OPs' viability, Cartwright said. The federal government was forced to pay for the program using only money collected from insurers under appropriations legislation enacted in 2014 that was pushed by Republicans, he said.
It's the “height of hypocrisy” for Republicans to say the CO-OP program is a failure, Cartwright said. “It's like only putting a gallon of gas in your gas tank and expecting to drive 200 miles on it and then blaming the car for not making the 200 miles.”