Health insurance rates could rise with freeze on insurer payments

Blue Cross Blue Shield of Michigan faces a $105 million payment cut based on the Trump administration’s announcement last week that it has frozen the program that transfers money from health insurers with healthy patients to those that have sicker and more expensive members.

While bad news for the Blues, Priority Health stands to keep $57 million in payments it would have had to make to the Centers for Medicare and Medicaid Services this month to help reimburse insurers like Blue Cross for covering people with higher-cost conditions in the small-group and individual markets.

At stake nationally is not only transfer amounts between health insurers of $10.4 billion for 2017, but the uncertainty about 2019 premiums in the individual, catastrophic and small-group markets.

The risk-adjustment payments are not taxpayer funds. They come completely from within the health insurance industry based on a federally approved formula, one that is somewhat controversial.

The freeze comes just as health insurers in Michigan have submitted premium rates in the individual and small group market for 2019.

Open enrollment starts Nov. 1, and Michigan health insurers usually receive final rate approvals in August from the state Department of Financial and insurance Regulation. Late last week, DIFS received proposed rates that average a 1.4 percent increase for individuals on the Obamacare marketplace and a cut of 0.2 percent for small group plans.

However, health insurance experts tell Crain’s those proposed rates could increase based on the Trump administration’s actions.

“Any action to stop disbursements under the risk adjustment program will significantly increase 2019 premiums for millions of individuals and small-business owners, and could result in far fewer health plan choices. It will undermine Americans’ access to affordable care, particularly for those who need medical care the most,” according to a statement from Scott Serota, president of the Blue Cross and Blue Shield Association. The Michigan Blues is a member.

The purpose of the Affordable Care Act risk-adjustment policy is to encourage health insurers to stay in the individual and small-group markets, where traditionally profit margins aren’t as high as in the employer-sponsored or Medicare markets.

Risk-adjustment payments also were designed to discourage health plans from cherry-picking healthy patients and leaving other insurers to take on sicker patients.

In Michigan, several health insurers, led by Priority Health, pay into the $10.4 billion fund. Nationally, Molina Healthcare, which operates in Michigan, has a $853 million bill. Oscar Insurance Co., which is new in Michigan, owes $72 million. Kaiser Permanente is owed $928 million, the largest.

If nothing changes and the risk-adjustment rule goes away. Priority’s Marti Lolli, chief marketing officer and senior vice president for consumer and government markets, said the Grand Rapids-based insurer would adjust its rates for 2019 to give back the money to policyholders in refunds.

But Blue Cross might have to increase its proposed rates for 2019 because it would have to account for that $105 million expected payment.

Helen Stojic, Blue Cross’ director of corporate communications, said the health insurer is disappointed the Trump administration has frozen the payment transfers. She said the program is designed to keep costs down for consumers.

“Risk adjustment is a concept that has been long supported and embraced by both Republicans and Democrats through programs like Medicare Advantage,” Stojic said in a statement to Crain’s. “We encourage CMS to use all avenues available to make the payments on schedule and should do so to protect consumers.”

Stojic said the program does not cost taxpayers any money and has worked effectively to help balance the cost of caring for those with significant health needs by ensuring that health plans are able to enroll everybody regardless of their health status.

“The action taken will create uncertainty for those in the individual market — particularly as insurers finalize their offerings for the next open enrollment that begins in November,” Stojic said.


« »