The CMS released data on Friday showing the results of a program meant to stabilize insurance premiums in the Affordable Care Act insurance markets.
Now in its fifth year, the permanent risk-adjustment program shuffles money from plans that enroll relatively healthy members to plans that enrolled sicker ones. The goal is reduce the incentive for plans to cherry-pick healthy members, and the CMS said it's working as it should.
The agency said 572 health insurers participated in the zero-sum program for the 2018 benefit year, and transfers between the companies totaled $10.4 billion—$5.2 billion in payments and $5.2 billion in charges. The agency included insurer-level payments and charges in its report.
Insurers that received relatively high medical claims during the year were more likely to receive payments from the program, while those with lower medical claims were more likely to pay into the program.
Insurers with in the highest quartile of medical claims costs received risk-adjustment payments of about 15% of their total premiums, down from 21% the year before. And insurers in the lowest quartile of claims costs paid into the program about 12% of total collected premiums, down from 17% the year before.
Those declines in payments and charges were due to changes in the risk-adjustment formula as well as enrollment shifts toward bronze and gold plans.
The formula used to determine risk adjustment payments is based on a health plan member's risk score, which factors in demographic information and patients' health conditions. Generally, the higher the risk score, the sicker the patient; the lower the risk score, the healthier the patient.
The CMS said risk scores didn't budge much between 2017 and 2018. Overall, risk scores during 2018 increased just 0.4% in the individual non-catastrophic group and decreased by 0.2% in the small group risk pool when compared to the 2017 risk scores. State average risk scores in the individual market experienced small increases across all metal levels.
The risk-adjustment program is a controversial one. Small health plans and ACA co-ops have long argued that the formula used to calculate payments favors large plans with more claims experience. In early 2018, insurance co-op New Mexico Health Connections won a partial victory in a lawsuit challenging the program. In response, the Trump administration froze payments to insurers for the 2017 benefit year but then restored the program not long after. Litigation in the case is ongoing.
The CMS has made some changes to the risk-adjustment program in response to insurers' demands. In 2018, certain prescription drug classes were included in adult patients' risk scores. It also excluded some administrative costs and for the first time included a high-cost risk pool in the methodology to reimburse insurers for very costly enrollees.
