OK, Healthcare Wonks Who Know What This Means...
Here's your chance to explain whether this is Good or Bad news.
You may recall that in early May, Rebecca Stob, an actuary iin Washington State, wrote a guest post explaining why a new Standard & Poors report which had just come out was a bit troubling but no cause for major alarm (yet). It basically has to do with the "Three R's" put in place by the ACA (Risk Adjustment, Reinsurance and Risk Corridors) for insurance companies to help smooth the transition from the pre-ACA world over the first few years.
In her post, Stob referred to the fact that:
2014 results are still uncertain for the other 2Rs. What is reported in insurer's financial statements are still estimates and insurers won't know the results from risk adjustment and reinsurance until they get the final report in June.
Well, it's the last day of June, and sure enough, look what was just released...
FOR IMMEDIATE RELEASE
June 30, 2015
Contact: CMS Media Relations
(202) 690-6145 | CMS Media Inquiries
CMS continues to implement the premium stabilization programs
Today, the Centers for Medicare & Medicaid Services (CMS) took the next steps in implementing two of the Affordable Care Act’s premium stabilization programs – risk adjustment and reinsurance – that help keep premiums affordable and provide consumers with a range of coverage choices. CMS released a report detailing the estimated reinsurance payments by issuer and providing additional information on the premium stabilization programs.
“These important programs are protecting consumers’ access to a wide range of affordable coverage choices in a new health insurance market in which no one can be denied coverage or charged higher premiums simply due to a pre-existing condition,” said Kevin Counihan, CEO of the Health Insurance Marketplaces. “The early results for the risk adjustment and reinsurance premium stabilization programs demonstrate that these programs are working as intended, which will help keep premiums stable and encourage insurance companies to compete on quality and price, not who can attract the healthiest enrollees.”
Before the health care law, the individual markets in most states allowed issuers to deny coverage to people with pre-existing conditions, preventing many Americans from accessing quality, affordable health coverage. The Affordable Care Act changed that by guaranteeing people who may have a medical condition with access to such insurance plans. The premium stabilization programs are designed to stabilize the market as guaranteed access is implemented and reduce the incentive to enroll only healthy and low-risk individuals.
The transitional reinsurance program helps keep premiums stable and affordable for consumers by protecting against high-cost claims from individual market consumers, which could otherwise force insurance companies to raise their premiums. The permanent risk adjustment program protects consumers’ access to a range of affordable coverage options by reducing the incentive for insurance companies to seek to insure only healthy individuals. The temporary risk corridors program, which is not covered in today’s report, keeps premiums affordable and stable for consumers by mitigating uncertainty in claims costs during the first three years of the Marketplaces, which encourages issuers to price competitively. Risk corridor payments will be calculated later this year.
CMS has worked with issuers for months on the data submissions for the premium stabilization programs, providing technical assistance to make sure that insurance companies submitted complete data. After analyzing the data submitted by issuers of their reinsurance contributions and requested reinsurance payments, CMS determined that the number of eligible high cost claim expenses were lower than expected for the 2014 benefit year. Because of these lower than expected claims, CMS recently announced that, consistent with its regulations, instead of paying 80 percent of eligible high cost claim expenses (that is, expenses between $45,000 and $250,000), all eligible claim expenses for the 2014 benefit year would be paid at 100 percent.
The report released today details the total estimated reinsurance payments by issuer and also provides summary level information on the program. The report includes issuers’ risk adjustment charge or payment information. In addition, the report includes an early assessment of the risk adjustment program that shows the program is working as intended by compensating issuers who enrolled higher risk individuals, helping protect against adverse selection within a market. Issuers will use the reinsurance and risk adjustment amounts to calculate their risk corridor payments and medical loss ratio rebates, if any.
To read the Risk Adjustment & Reinsurance report, visit: https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization...
Again, this stuff gets way into the weeds and beyond my pay grade, so I won't speculate as to what it all means. The only thing I'll note is the bold-faced part above, which sounds positive, anyway...
UPDATE: OK, the great Larry Levitt of the Kaiser Family Foundation is tweeting out his initial thoughts, and so far they're pretty positive:
About $1.8 billion in additional reinsurance money will be available for insurers in 2015 and 2016, which is welcome news for the industry.
— Larry Levitt (@larry_levitt) June 30, 2015
By my back of the envelope calculation, insurers did as well financially in the individual insurance market in 2014 as in previous years.
— Larry Levitt (@larry_levitt) June 30, 2015