July 5, 2016
The CEO of CareConnect, the insurance company started by Northwell Health, says he needs the Cuomo administration to take extraordinary action if his company is to remain solvent.
The company, which offers insurance plans on the individual and small group markets, owes roughly $13 million in small group Risk Adjustment payments, which were announced by the Centers for Medicare and Medicaid Services Thursday evening.
That’s 30 percent of revenue, said Alan Murray, CareConnect CEO. He believes the state’s Department of Financial Services has the authority to declare those payments a solvency risk to CareConnect and prohibit them from being made.“Nobody wants that to happen because nobody wants a solvency issue,” Murray said on Friday. “But at the same time if it doesn’t happen I don’t have the money to pay the risk adjuster. That’s the facts that are present.”
The risk adjustment program, part of the Affordable Care Act, was designed to dissuade insurers from targeting only healthy people and avoiding those with chronic medical conditions. In theory, it's a simple program. The CMS gives insurers a score based on enrollee demographics and medical diagnoses, which stands in for the health of their population. Those with a low score — meaning they have a healthier than average population — pay those with a higher score.
Murray, Oscar CEO Mario Schlosser and EmblemHealth CEO Karen Ignagni say New York’s calculations do not reflect reality and are, in effect, punishing smaller providers while larger companies, which are better at documenting, reap financial rewards.
“EmblemHealth feels strongly that our responsibility is to have a deep presence in the communities we serve, and provide quality health care coverage to all New Yorkers, including exchange members,” Ignagni said in a statement. “We believe that there are fundamental flaws in the Risk Adjustment program that directly impact both the stability and the future of health care reform, and we will continue to work with our regulators to address these issues."
EmblemHealth owes $36 million in small group Risk Adjustment payments. Aetna Life Insurance Company owes $93 million.
The big winner is Oxford Health Insurance, part of UnitedHealthCare, which controls roughly 70 percent of the small group market, and is owed $315 million from the Risk Adjustment program. That means, that according to federal officials, Oxford has significantly sicker enrollees when compared to most other companies in New York State. The real-world effect is that the state’s smallest providers in the small group market are subsidizing their largest competitor.
“The small group is just completely bizarre,” Murray said. “It makes no sense at all.”
The Cuomo administration appears to agree, and last week, DFS Commissioner Maria Vullo wrote to Sylvia Burwell, the U.S. Secretary of Health and Human Services, saying she is “concerned that the Risk Adjustment program has created inappropriately disparate impacts among health insurance issuers in New York and unintended consequences.”
What Vullo and many insurance executives across the country are worried about is that established companies selling plans in the small group market are simply better at the paperwork the federal government requires in order to prove the health — or in this case the sickness — of their patient population.
“CMS’s anticipated determination appears to be unduly impacted by the dates of diagnoses or recording of diagnoses of members’ medical conditions rather than actual relative health of the members,” Vullo wrote. “This disparity may be because the new and smaller health insurers have not been in operation long enough to have amassed the long term data and records management systems that have helped to allow the large, established health insurers to convince CMS that their members are relatively more unhealthy and, concomitantly, will allow them to receive large payments from the risk adjustment program.”
The individual market has its quirks as well.
MetroPlus, the health insurer from the city’s public hospital system, will pay more than $30 million and Fidelis owes more than $56 million. Oscar owes nearly $31 million.
MVP will receive more than $25 million while Excellus Health Plan is set to take in nearly $45 million.
Vullo asked the Obama administration for “immediate changes” to the Risk Adjustment program.
The problem for a company such as CareConnect isn’t only the $13 million, which is calculated based on scores from 2015. It is what Murray believes he will need to reserve for Risk Adjustment payments in next few years. Because his membership grew, he expects the Risk Adjustment payment to grow as well.
“Paying $13 million for 2015, I can withstand,” he said. “But I have to project it forward for 2016. [That] means I have to come up with an $80 million payment. … It would be one thing if it were appropriate and our Medical Loss Ratio were in the 50s, but this is just a direct pass through to UnitedHealthCare."