Earlier this month, the Centers for Medicare & Medicaid Services (CMS) announced that it was suspending the risk adjustment program, after a ruling by a judge in the U.S. District Court for the District of New Mexico. A small co-op in New Mexico sued, saying the program hurt smaller insurers. The court’s ruling is not yet final, but the judge says it will be by the end of the summer.
What Is the Risk Adjustment Program?
Risk adjustment is a reimbursement program created as part of the Affordable Care Act (ACA). It helps health insurers provide coverage for individual and small group members with high medical needs by sharing the cost of covering them with health insurers who cover healthier people.
In Louisiana, Blue Cross takes all comers in the individual market, which means we cover both healthy members and those with greater medical needs. The risk adjustment program has been there to help us provide valuable protection for all members, regardless of their health status.
We were among the first insurance companies to join the exchange, and today we are one of only two insurers in Louisiana that still participates. Although we lost money during the first three years we were on the exchange, we kept our commitment to Louisiana and stayed the course. We’re committed to staying in the exchange in 2019.
You might have a few questions about risk sharing and what it could mean to your insurance premiums. I’ve tried to answer them.
How Does Risk Adjustment Work?
Risk adjustment creates a “level playing field” for health insurance companies that participate on healthcare.gov (also called the exchange). Risk adjustment is there to help health insurers share the costs of covering customers with higher healthcare expenses.
Each year, insurers report claims, premiums and risk scores to CMS, which takes that information and calculates an average profitability for each insurance company. Companies with earnings above the average have to pay CMS, and CMS uses that money to reimburse insurance companies with earnings below the average. Sometimes the earnings are a negative number (like in 2015-2016 here at BCBSLA).
It’s important to note that the risk adjustment program does not involve government or taxpayer money. It is simply a transfer of funds from insurers covering healthier members to insurers covering members with more health needs. The program is considered “budget neutral.” CMS just administers it.
What Does the End of the Risk Adjustment Program Mean To Me?
The risk adjustment program is based on the previous year’s revenue. In this case, it’s 2017 revenue. CMS reported that Blue Cross is owed more than $41 million from our 2017 revenues. It is a lot of money, but your coverage and your rates will not change for the remainder of this year. We don’t know yet how the suspension will affect rates for 2019. Fortunately, Blue Cross has a reserve fund to cover these types of losses, so there’s typically no disruption to our customers. But if risk adjustment payments are not reinstated, it could affect rates in the future.
Does This Mean Blue Cross Will No Longer Participate On healthcare.gov?
Blue Cross and Blue Shield of Louisiana is committed to participating in the individual market in 2019. We will offer plans statewide and give all of our customers the quality coverage they deserve.
Blue Cross is a nonprofit company, owned by our members. That means we can make decisions truly based on what’s best for our customers—not shareholders demanding dividends. That’s also one reason we work so hard to keep costs down and keep our plans affordable. It’s why we are here, after all! Our friends and families are Blue Cross members, too! The risk adjustment program has helped us keep individual plans affordable and keep our commitment to Louisiana.
Does Blue Cross Agree with the Court’s Decision?
We are disappointed in this decision and urge CMS to do everything they can to restore the payments and make them on schedule. Re-starting the risk adjustment program will help stabilize the individual market and help make coverage more affordable.
And that’s the Straight Talk on risk adjustment.