ACA Risk Adjustment Formula Alleged to Provide Bigger Payments to Larger Insurers
Health cooperatives file lawsuit against the federal government over perceived mismanagement that creates an inaccurate formula.
Additional health cooperatives participating in Affordable Care Act (ACA) marketplaces recently filed lawsuits against the federal government over its risk adjustment formulas.
The 2 companies, New Mexico Health Connections and Minuteman Health of Massachusetts, allege in their lawsuits that the federal government mismanaged the risk adjustment program by creating an inaccurate formula, according to The Wall Street Journal. They also allege that larger insurers were overly rewarded because of the formula.
Evergreen Health in Maryland was the first ACA co-op to file a suit against the federal government in June. A judge recently denied their motion to suspend payment during the lawsuit.
Co-ops received federal funds to create additional competition in the marketplaces, but these co-ops are among the last that have survived. The co-ops involved in the lawsuits allege that the US Centers for Medicare and Medicaid Services (CMS) hurt their business because of the risk-adjustment program.
“Congress directed CMS to transfer funds between insurers based on the health status of their members,” Minuteman chief executive Tom Policelli said to the Journal. “Instead, CMS created a program that rewards expensive insurance companies who cater to consumers buying expensive products.”
However, CMS officials have announced plans to fix problems with the program to ensure beneficial results for all involved.
“As the data show, companies with sicker-than-average enrollees will receive payments from other health insurance companies with healthier-than-average enrollees,” said Aaron Albright, a CMS spokesman. “We continue to work with companies and states to refine the program so that risk adjustment works for both insurance companies and consumers shopping for affordable coverage.”
Other programs were put in place to help insurers in the first 3 years of the ACA, such as the reinsurance program that helps cover the most expensive claims, and risk corridors were set up to give profits from insurers that fared well to insurers that did not do well, according to the Journal. While these 2 programs will be discontinued next year, risk adjustment will still be in place despite insurer complaints that the program is not set up well, and can be difficult to predict finances.