Just when you thought that you could not be confused anymore? The program, called “risk adjustment,” is a provision of the Affordable Care Act (ACA) that takes effect this year and makes no sense at all.
Before we do get into that, keep this one thing in mind. The only way you will ever control premiums is to control claim costs! One would assume then that ACA would reward those who insurance companies, employers and employees that control claim costs, right?
More or less “risk adjustment” payments are suppose help health insurance carriers that are getting hit with alot of claims. Basically it is income redistribution but instead of taxing the rich and giving those monies to the poor, you penalize carriers that have low claims and transferring those monies to carriers with a high claims.
Better yet let me give you an example. Lets say you have no health insurance, but you know that you will be having alot of health procedures. Since there are no pre-existing condition limitation, everything will be covered but you had two choices:
- Health Insurance Company A that has limited networks and high co-payments for expensive drugs that has negotiated hard with their providers to come up with the lowest possible reimbursements to save the health plan money.
- Health Insurance Company B that has every single hospital and lower co-payments.
Even if Company B was more expensive, you would pick them since you will be banging out the claims and want the best network with the lowest co-payments. You would think Company B would be worried with all these claims and mounting losses, but they are not due to “risk adjustment” payments. How much money are we talking? Here are the results of the first Risk Adjustment process in Massachusetts as determined by the Massachusetts Health Connector:
- Blue Cross Blue Shield HMO Blue, Inc. $49,839,020 received
- Blue Cross Blue Shield of Mass., Inc. $1,836,923 received
- Boston Medical Center HealthNet Plan $5,149,610 payment
- Celticare $481,138 payment
- ConnectiCare Massachusetts $1,243,072 payment
- Fallon Community Health Plan $11,861,230 payment
- Fallon Health and Life Assurance Company $850,658 received
- Harvard Pilgrim Health Care, Inc. $480,259 received
- Harvard Pilgrim Insurance Company $4,055,614 payment
- Health New England $2,630,068 payment
- Minuteman Health $3,064,679 payment
- Neighborhood Health Plan $27,646,254 payment
- Network Health $3,690,452 payment
- Tufts Associated Health Maintenance Organization $6,826,667 received
- Tufts Insurance Company $1,623,818 received
- United Healthcare $1,635,227 payment
Check out this from the Boston Globe:
Thomas D. Policelli, chief executive of Minuteman Health, a small health plan founded in 2013, said the $3 million his plan is being assessed amounts to 71 percent of the premiums collected in 2014.
Are you kiddin me 71% of the premiums they collected! Now that you know the only way to ever control premiums is to control the costs of claims how does rewarding companies that have high claims through “risk adjustment” payments encourage that?