The Centers for Medicare and Medicaid Services (CMS) recently announced it will transfer $10.4 billion among insurers that issue plans on the Affordable Care Act’s (ACA) exchanges as part of a risk adjustment program.
The ACA created the risk adjustment, reinsurance and risk corridors programs to discourage plans from avoiding sicker patients by offsetting the cost of enrolling patients with more expensive conditions. Under the risk adjustment program, CMS transfers funds from plans with lower-risk enrollees to plans with higher-risk enrollees. CMS reported that 572 issuers participated in the risk adjustment program for the 2018 benefit year. Of those that participated, 552 received a risk adjustment transfer. The 2018 risk adjustment payments were about 9% of premiums, down from 10% in 2017.
The Patient Protection and Affordable Care Act established a permanent risk adjustment program, one of three premium stabilization programs, to provide payments to health insurance issuers that cover higher-cost and higher-risk populations to more evenly spread the financial risk borne by issuers and help stabilize premiums. The risk adjustment program provides payments to health insurance issuers that have high-risk enrollees, such as those with chronic conditions, reduces the incentives for issuers to avoid those enrollees, and lessens the potential influence of risk selection on the premiums that plans charge. The risk adjustment program is designed to support issuers offering a wide range of benefit designs that are available to consumers at an affordable premium.
In addition to the risk adjustment program payments, CMS also made payments as part of a high-cost risk pool. The pool, which is funded by a 0.20% fee on issuers that participate in the risk adjustment program, reimburses plans for 60% of aggregated enrollee claims that reach $1 million.CMS paid $178 million to plans in the individual market and $193 million to small group issuers through the high-cost risk pool. The report is available at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/Downloads/Summary-Report-Risk-Adjustment-2018.pdf.
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