NY DFS Takes Emergency Action to Fix Risk Adjustment Payments

[RayNY]

As we know, federal risk adjustment payments are tied to losses and market share.

Moral is, a company with a relatively small percentage loss, but many members, is entitled to more money than a small company with a large percentage loss.

So, relatively small CareConnect owes $53.3M for the first 6 months of 2016, after a $41M operating loss, on top of 2015's $13.3M risk adjustment payment.

Keep in mind, they collected around $150M total for the first six months of 2016. They're paying out over 30% of collected premium in risk adjustments alone, while running at a 130% loss ratio.

No surprise, they're threatening to pull out of the marketplace.

Our lawmakers' genius idea is to set up a "market stabilization pool". Basically, they'll look at the company performance and the risk adjustment, and if they determine it's an issue, they'll make the recipient of the federal funds pay into the pool, which would then pay the adversely impacted company.

Yes, you read that right, they're re-distributing the risk adjustment payment via a secondary pool. Essentially, refunding it, while creating a heck of an administrative burden.

Official press release, with the full text of the emergency regulation, is publicly available on the DFS website: Press Release - September 9, 2016: DFS Issues Emergency Regulation to Address New York Factors Necessary to Remedy Adverse Impact of Federal Risk Adjustment Program on New York Health Insurers

 

[Yagents]

Me favorite...........Liberal magic money tricks.

 

[dgoldenz]

lol, what could possibly go wrong?

 

[RayNY]

I didn't realize this when reading the information initiall, but the emergency regulations have been made official via Executive Order No. 17, filed with Secretary of State on 9/9/16 and published in State Register 9/28/16.

http://www.dfs.ny.gov/insurance/r_emergy/re146text.pdf

Re-reading the proposed law, seems like it's destined to create even bigger issues than it's supposed to solve:

(i) the superintendent shall send a billing invoice to each carrier required to make a
payment into the market stabilization pool after the federal risk adjustment results are
released pursuant to 45 CFR section 153.310(e);
(ii) each carrier shall remit its payment to the superintendent within ten business days of
the later of its receipt of the invoice from the superintendent or receipt of its risk
adjustment payment from the Secretary of the United States Department of Health and
Human Services pursuant to 42 U.S.C. section 18063; and


Carriers will be billed for their FULL market stabilization amount, after the RESULTS for federal risk adjustment are released. I foresee a scenario where a company is awarded X in risk adjustment, owes 30% of X to market stabilization, has to pay within 10 days, meaning, they're drawing off reserves, and then only receives 12.6% of X whenever the gov't gets around to it. In this scenario, the risk adjustment payment is actually made bigger.

 

[HealthRisk]

Oh my. I think unintended consequences are going to reign supreme on this.

Looking at the 2015 figures, part of the issue appears to be the now defunct Health Republic submission. With them gone, things could stabilize.

 

[scagnt83]

Stupidity cant fix stupidity
__________________________

 

[RayNY]

HealthRisk,

Everyone forgot about health re-whats-it already.

This is a direct response to CareConnect threatening to leave the market for 2017 after getting a 2016 RA assessment equal to about 30% of their total premium (while running at a >130% loss ratio).

 

[Ann H]

Riddle me this about risk adjustment in general (not specific to this NY idea). If 31% of US counties have 1 carrier, how does the sole carrier pay into a fund to shore up the carrier that lost the most?

 

[barb12]

Could someone please clarify how the reinsurance program which I am assuming it is related to the risk corridor program of how it is suppose to work?

According to Forbes, the reinsurance program requires a fee from every insurer meaning all health insurance companies for every member that is covered under their company.

What is confusing me is that Forbes also states the fee is also supposed to be collected from all 3rd party administrators of self-insured employers.

Self-insured employers do not pay full premiums to 3rd party administrators. The member count of the 5 major carriers includes the employees that have coverage from their self-insured employer. I don't think they should be counted as members under those employer contracts since those employers do not pay them full premiums.

Anyway, I am interpreting this to mean that every person covered under a private health plan, a fee is required for every person with health coverage.

The total amount collected from every insurance company who is also collecting a fee from all of the self-insured employers they administer to is sent to the HHS.

This funding was to be distributed to the individual and small group market that participates on the exchanges for members that occurred high medical claims cost. 3 billion for all 3 years 2014, 2015, 2016 was suppose to be subtracted from the total fees collected from insurers to pay the treasury department.

The treasury dept was paid only 0.5 billion out of the total amount collected of 16.2 billion which was paid to the insurers on the exchanges.

My question is why are the carriers who offered plans on the exchanges and are the same insurers that were required to pay for each member to HHS and got it all back are leaving the exchanges?

 

[HealthRisk]

Could someone please clarify how the reinsurance program which I am assuming it is related to the risk corridor program of how it is suppose to work?

According to Forbes, the reinsurance program requires a fee from every insurer meaning all health insurance companies for every member that is covered under their company.

What is confusing me is that Forbes also states the fee is also supposed to be collected from all 3rd party administrators of self-insured employers.

Self-insured employers do not pay full premiums to 3rd party administrators. The member count of the 5 major carriers includes the employees that have coverage from their self-insured employer. I don't think they should be counted as members under those employer contracts since those employers do not pay them full premiums.

Anyway, I am interpreting this to mean that every person covered under a private health plan, a fee is required for every person with health coverage.

The total amount collected from every insurance company who is also collecting a fee from all of the self-insured employers they administer to is sent to the HHS.

This funding was to be distributed to the individual and small group market that participates on the exchanges for members that occurred high medical claims cost. 3 billion for all 3 years 2014, 2015, 2016 was suppose to be subtracted from the total fees collected from insurers to pay the treasury department.

The treasury dept was paid only 0.5 billion out of the total amount collected of 16.2 billion which was paid to the insurers on the exchanges.

My question is why are the carriers who offered plans on the exchanges and are the same insurers that were required to pay for each member to HHS and got it all back are leaving the exchanges?

The reinsurance program is a separate calculation from risk corridors.

The program worked by assessing a fee on all major medical policies sold, including self insured policies. HHS then collected all the money. They then distributed it out based upon individual market large claims, with a 250K ceiling, capping those million dollar claims. Each carrier was able to get some money back for expensive people. But as soon as they blew through 250K, the insurer was back on the hook 100%.

The other part was that premium levels were required to reflect both the fee and projected reimbursements. The program ends 12/31/16 and is a small part of the reason 2017 rate increases are higher than typical. The idea was to provide a transition to true individual rates in 2017. That is working out so well now.