Risk Pool Gains on Horizon for Health Insurance Marketplace

August 30, 2016 - With a number of healthcare payers including UnitedHealthcare and Aetna dropping out of the Affordable Care Act’s health insurance marketplace, the Centers for Medicare & Medicaid Services (CMS) issued an annual Notice of Benefit and Payment Parameters for 2018 in order to improve the health insurance marketplace for both payers and consumers.

These additional steps will bring more regulation and certainty to the public health insurance marketplace, according to a press release from CMS. The policies set up within the Notice of Benefit and Payment Parameters seek to strengthen the risk adjustment program operating within the ACA health insurance exchanges. Risk adjustment helps consumers by ensuring affordable and quality healthcare coverage, CMS stated in the release.

The way the risk adjustment program works is by requiring healthcare payers serving healthier, younger populations to position funds toward insurers with a much higher risk pool. The new rule proposed by CMS would strengthen risk adjustment by creating more effective protocols for pooling risk.

The new rule outlines protocols to manage risk among consumers who are not enrolled for a full 12 months in a particular health plan. These updates will be used beginning in 2017. Also, in early 2018, the proposal suggests incorporating prescription drug data to enhance the predictability used in risk adjustment models.

Additionally, a transfer method will also be applied to spread out risk among high-cost consumers by 2018. The new proposed rule will also bring more benefits for consumers in the form of keeping health coverage affordable. Consumers would gain more insight into the coverage options among differing and competing health plans as well as gain more consumer protections, CMS reported.

“Right now, we are preparing to serve millions of consumers with a new set of innovations during the upcoming Marketplace Open Enrollment. As we do this, we are proposing today a set of critical actions based upon our first 3 years' experience that, if finalized, would improve how consumers and health plans interact with the Marketplace,” Acting Administrator of the Centers for Medicare and Medicaid Services Andy Slavitt stated in the press release. “These proposals help fulfill the promise that affordable, quality health coverage can be provided to everyone who needs it.”

Since this is a proposed rule, CMS will be seeking more input from health payers, providers, and consumers regarding how to improve the risk pool and risk adjustment program among insurers operating within the ACA health insurance marketplace.

The Affordable Care Act has brought more benefits to Americans than solely through the public health insurance marketplace. For instance, the Affordable Care Act has brought greater health coverage to low-income Americans through the inclusion of Medicaid expansion programs and funding.

In fact, the Department of Health and Human Services (HHS) released a report showing that premiums in the health insurance marketplace actually dropped 7 percent among states that expanded their Medicaid programs, according to an HHS news release.

“Today’s report identifies yet another group that would gain if all states chose to expand Medicaid: Marketplace consumers, who would see lower premiums,” HHS Secretary Sylvia M. Burwell said in a public statement. “These gains are on top of the direct benefits of expansion for millions of Americans who would gain coverage and on top of the economic benefits for states. The Administration remains committed to working with all states to expand coverage and improve the health and financial well being of their citizens.”

The HHS report shows that states that haven’t expanded their Medicaid programs may actually lead to more expensive premiums for their residents. By refusing Medicaid expansion, millions of low-income citizens who are working and potentially have serious health concerns are essentially denied medical coverage and healthcare access.

These individuals are often unable to afford the health insurance available on the exchanges. Many fall into a coverage gap where they do not qualify for tax subsidies through the public health insurance marketplace nor Medicaid health plans.

“The ACA Medicaid expansion was designed to address the high uninsured rates among low-income adults, providing a coverage option for people who had limited access to employer coverage and limited income to purchase coverage on their own,” according to a report from the Kaiser Family Foundation.

“However, with many states opting not to implement the Medicaid expansion, millions of uninsured adults remain outside the reach of the ACA and continue to have limited, if any, option for affordable health coverage: they are ineligible for publicly-financed coverage in their state, most do not have access to employer-based coverage through a job, and all have limited income available to purchase coverage on their own.”

Additionally, HHS argues in the release that states that do not accept the funding for Medicaid expansion are giving up stimulating their economy. The new research illustrates that consumers on the public exchanges are left facing higher premium costs because their states declined expanding their Medicaid programs.

The HHS report found that marketplace risk pools in states that expanded Medicaid coverage are made up of consumers with incomes above 138 percent of the federal poverty line while the risk pools in states that declined Medicaid expansion are comprised of consumers whose incomes fall below 138 percent of the federal poverty line.

Along with the proposed rule to strengthen the risk adjustment program within the health insurance marketplace, individual states could boost the affordability of healthcare insurance under the Affordable Care Act by expanding Medicaid coverage.

Dig Deeper:

How Risk Adjustment Challenges the Health Insurance Market

Kentucky Governor Proposes Waiver for Medicaid Expansion