ACA co-ops face big risk-adjustment charges

Some of the smallest insurance companies will be the biggest payers into the risk adjustment program established under the Affordable Care Act for this year.

According to new data released by CMS, regional insurers and ACA co-op plans stand to be among the biggest contributors to risk-adjustment payments, with many of that money going to larger, older insurers. For example, Illinois-based co-op Land of Lincoln Health owes nearly $32 million to the program, while Blue Cross Blue Shield of Illinois stands to receive $34 million in risk adjustment payments.

Several more of the 10 surviving ACA co-ops are due to pay some of the biggest risk-adjustment contributions, like Freelancers Co-Op of New Jersey ($46 million), Maryland’s Evergreen Health Cooperative ($24 million) and Connecticut’s Healthy CT ($13.4 million).

Notably, Evergreen have recently filed a lawsuit against HHS over the risk-adjustment policies. It argued that while the program was designed to offer financial protections for insurers which covered higher-risk people, and discourage insurers from trying to target only healthier, lower cost customers, the way a patient’s risk score is calculated favors older, larger insurers with more claims data, while understating the risk taken on by the smaller companies.

While many of the largest recipients are larger insurers—with the biggest recipient in the individual market being Blue Cross of California at $182 million—not all of those bigger companies benefitted. Kaiser Permanente owes $169 million in risk-adjustment payments for its California exchange offerings, though it will see a net gain thanks to $194 million it’s due under the separate reinsurance program.

CMS has laid out suggestions for changes to the risk-adjustment program, but the proposed rule wouldn’t have an impact on this year’s totals.