Trump's CMS Dept Openly Admits: Indy Market Risk Pool Improving

I'm a couple of days late to the party on this one, but it still bears repeating:

New data have been released contradicting Republican propaganda about the “failing” Affordable Care Act. What may be more embarrassing to the hardliners pushing repeal is that it comes from the government, specifically the Department of Health and Human Services.

Under Secretary Tom Price, the department has been a fount of anti-ACA rhetoric. But in an annual report about the ACA’s risk-management provisions issued Friday, Health and Human Services established that the key programs are “working as intended,” protecting insurers from unexpectedly large risks and moderating premiums for consumers.

Not only that, the data “would seem to refute the commonly held belief that the marketplace population is becoming sicker,” observes health economist Timothy Jost, writing in Health Affairs. In fact, according to the figures from 2016 in the latest report, the customer base is getting healthier and the risk pools have been stabilizing.

First of all, kudos to L.A. Times reporter Michael Hiltzik for using "data" correctly (data is actually the plural form of "datum"). Pet peeve of mine when people get it wrong, which is almost always.

OK, so what's the report itself (from CMS) say?


I. Highlights of the Summary Report on Transitional Reinsurance Payments and Permanent Risk Adjustment Transfers for the 2016 Benefit Year

The transitional reinsurance and permanent risk adjustment programs functioned smoothly for the 2016 benefit year, as the Patient Protection and Affordable Care Act compliant market continued to grow.

  • The reinsurance program provides payments to issuers of non-grandfathered, individual market plans subject to the federal market reforms established under the Patient Protection and Affordable Care Act.
  • The risk adjustment program applies to any health insurance issuer offering plans in the individual or small group market, with the exception of grandfathered health plans, group health insurance coverage described in 45 C.F.R. § 146.145(c), individual health insurance coverage described in 45 C.F.R. § 148.220, and any plan determined not to be a risk adjustment-covered plan in the applicable Federally certified risk adjustment methodology.
  • A total of 767 issuers participated in the reinsurance and risk adjustment programs for the 2016 benefit year, of which 726 established EDGE servers.
  • Of 496 issuers participating in the reinsurance program, all issuers successfully submitted the EDGE server data necessary to calculate reinsurance payments.
  • Of 751 issuers participating in the risk adjustment program, 710 submitted EDGE server data to calculate risk adjustment transfers. The default risk adjustment charge was assessed to 1 of these issuers for failure to provide HHS with access to the required data and to an additional 41 issuers that did not submit EDGE server data.

The transitional reinsurance program continues to provide significant protection to individual market issuers with exceptionally high-cost enrollees.

  • The initial, estimated reinsurance coinsurance rate for the 2016 benefit year is 52.9 percent. 1
  • For the 2016 benefit year, as of the date of this report, an estimated $4 billion in reinsurance payments will be made to 496 issuers nationwide.

Both the transitional reinsurance program and the permanent risk adjustment program are working as intended in compensating plans that enrolled higher-risk individuals, thereby protecting issuers against adverse selection within a market within a state and supporting them in offering products that serve all types of consumers.

OK, I admit I don't understand much about this stuff, but the last sentence seems to indicate that all is well on this front. What else? Well, going back to Hiltzik's article:

But Jost correctly observes that the risk management programs have worked, as is documented in Friday’s HHS report and the previous annual surveys. In 2016, reinsurance is estimated to have reduced net claim costs by 4%-6%. Its termination, Jost writes, “has been a major driver of premium increases for 2017 and 2018.” As a result, both the House and Senate Obamacare repeal bills include more reinsurance funds for the individual market.

The conclusions in the Department of Health and Human Services report confirm that the ACA marketplace was stabilizing through 2016, despite GOP claims to the contrary. In fact, the marketplace did better than expected.

“There were a number of reasons to believe that risk scores would be higher for the 2016 benefit year relative to the 2014 benefit year,” HHS reported. Among other factors, the average enrollee spent more months on the exchanges in 2016 than in previous years. That typically leads to higher claims, because it produces “increased numbers of reported diagnoses, higher risk scores, and greater paid claims amounts per member, even when the risk profile of the membership is held constant…. Despite these factors, risk scores were stable in the individual market and decreased by 4 percent in the small group market.”

...Price, who was last heard praising the Senate GOP’s incompetent and malevolent Obamacare repeal bill, has been silent on his own agency’s data showing that Obamacare is working as designed, and that it’s helping Americans get healthier and stay that way.

Meanwhile, Covered California has issued their own analysis of the CMS report and what it means for the Golden State:

A new report from the Centers for Medicare and Medicaid Services (CMS) on two key premium-stabilization programs in the Patient Protection and Affordable Care Act provides national data that details the stable health mix across the country and the positive impact of the reinsurance program.

The report, “Summary Report on Transitional Reinsurance Payments and Permanent Risk Adjustment Transfers for the 2016 Benefit Year,” found that the two programs “functioned smoothly” in 2016 as the Affordable Care Act-compliant market “continued to grow.”

“This report provides hard evidence that contradicts those who would wrongfully claim that individual markets are collapsing,” said Peter V. Lee, executive director of Covered California. “The picture provided by the federal government is one of individual markets that are stable and maintaining a balanced risk mix of those insured, which should inform Congress as it considers what policy steps to take next.”

The report shows the “average risk score” across federal marketplace states, state-based marketplaces and California was nearly the same from 2015 to 2016 (see Figure 1 – Average Risk Score Comparison). More importantly, California’s individual market had a risk profile far better than the national average, which meant health care costs would be nearly 20 percent lower based on health status than the national average.

Further, the report provided important information about which markets are functioning well and how the tools of the current law have worked, including:

  • The other state-based marketplaces collectively had a healthier risk mix than the national average, which meant that health care costs in those 10 states would be 10 percent lower than the national average (the analysis excludes Massachusetts and Vermont because risk-score data was not available for these states).
  • In summarizing the risk-adjustment program, which is an ongoing feature of the current law, health plans that had “healthier” populations paid a total of nearly $3.6 billion nationally ($392 million in California) to those plans that had less-healthy enrollees.

“California continues to attract a healthy mix of enrollees, and this federal report is further evidence that the individual market in California and across the nation is stable and strong,” said John Bertko, Covered California’s chief actuary. “Generally, the risk profile of a large group gets worse over time, and the fact that across the nation the risk mix stayed constant is clear evidence that relatively healthier individuals are continuing to sign up for insurance.”

Lee identified three key reasons why California and other state-based marketplaces were relatively successful in attracting and keeping a healthier mix of consumers than the national average:

  • Covered California and state-based marketplaces appear to be investing proportionately more in marketing and outreach than the federal government, which is responsible for promoting enrollment in the Federally Facilitated Marketplaces.
  • State-based marketplaces like California were more likely to convert all health coverage in the individual market into “compliant” plans and created one common risk pool as of 2014.
  • California and other states that operate state-based marketplaces were more likely to expand their Medicaid program, which has a positive impact on the health status of the individual market.

In addition to these common factors, Lee noted that in California, health plans offer patient-centered benefit designs, which allow consumers to access a wide variety of care that is not subject to a deductible. That means consumers get more value from their coverage, which is believed to lead to maintaining a better risk mix.

However, Lee says the consumer pool in California and across the nation could be damaged in the face of continued uncertainty on the policy front, in particular regarding the direct payment of the federal cost-sharing reduction subsidy and continued enforcement of the penalty for not having insurance.

Shorter version: The individual market finally saw a light at the end of the tunnel this year...but it turned out to be an oncoming Trump Train.