September 10, 2016
NY Rule Eases Northwell's Insurance Concerns
September 9, 2016
State Moves to Protect Smaller Insurers from Federal Risk Adjustment Program
The Cuomo administration late Friday announced emergency regulations that would upend the federal government's risk adjustment program, a move meant to protect some of the state's smaller players and keep them from bolting the still nascent small-group market created by the Affordable Care Act.
The move comes the same day as the deadline for health insurance companies to contract with New York State of Health, the state-run exchange that sells insurance to individuals and small groups, and follows threats from several insurers that said they would not sell small group plans in 2017 if changes to the program were not made.
These regulations, which give Maria Vullo, the superintendent for the Department of Financial Services, extraordinary powers, only apply to the small group market and to 2017 risk adjustment payments. Those already assessed in 2016 remain in effect. Essentially, Vullo will be able to return a percentage of the payments the federal government's formula requires insurers to make if she feels the payments hurt insurers in the market.
"In order to support the continued success of the ACA and New York’s vibrant market, DFS is taking appropriate action to rectify certain unintended consequences of the federal risk adjustment program and correct the current imbalance due to issues that are not accounted for in the federal program," Vullo said in a statement.
The risk adjustment program was designed to dissuade insurers from recruiting only healthy people and avoiding those with chronic medical conditions. In theory, it’s a simple program. The Centers for Medicare and Medicaid Services gives insurers a score based on enrollee demographics and medical diagnoses, which stands in for the health of the population. Those with a low score — meaning they have a healthier than average population — pay those with a higher score.
The problem, according to many insurance companies, is that the formula is flawed. Even the Obama administration has acknowledged the program isn't working as intended. In New York State, Oxford Health Insurance, which is part of UnitedHealthCare and controls roughly 70 percent of the small group market, is set to receive $315 million from the program.
CareConnect, the insurance arm of Northwell Health, owes $13 million, roughly 30 percent of its revenue, according to company CEO Alan Murray.
In effect, the risk adjustment program is forcing CareConnect, a new, small insurer, to subsidize one of the state's most stable players.
These new emergency regulations allow Vullo to decide if a payment is too big and will have an "adverse impact" on the health of the market. If it does, the regulations require insurers who benefited from the risk adjustment program to pay into a fund that will be administered by the DFS. That money will then be transferred back to the insurers who paid into the program. The DFS is giving itself the authority to undo the program and just move a chunk of the money back.
The amount paid into this new pool cannot exceed 30 percent of the total amount an insurer received from the federal program.
The regulations are a boon for CareConnect, which had been the most vocal about the program's flaws.
"Northwell Health and CareConnect greatly appreciate the state’s recognition that the current structure of the risk adjustment program requires additional market-stabilization efforts," Northwell said in a statement. "It is important that the program’s methodology accurately reflect the risk profile of smaller, newer insurers writing small-group health policies. This emergency regulation provides significant relief to carriers that have been unduly and unevenly burdened. While more work remains to be done to fairly measure the risk of insurance companies and apply an actuarially sound methodology, these steps represent critical progress toward maintaining a stable, diverse and competitive health insurance market in our state."
The new rules could prove detrimental to companies such as Oxford, which did not respond to a request for comment.
The Health Plan Association, which represents both winners and losers in this deal, released a statement expressing dismay the new rules were announced after 2017 rates were set.
"The New York Health Plans Association has concerns about DFS changing the rules in the middle of the game, and believes these issues should have been identified and addressed before DFS set the 2017 rates under prior approval" the organization said in a statement.
The rules do not apply to the individual market, which also had large risk adjustment payments. One difference appears to be that insurance companies, at least in public, didn't threaten to pull out of the individual market if changes weren't made to the program.
Rich Loconte, a spokesman for the DFS, said the department wanted to "take action in the small market first and [is] exploring" the possibility of implementing these regulations in the individual market as well.
Crain’s Health Pulse
September 12, 2016
DFS Takes Emergency Action on Risk Adjustment
The state Department of Financial Services has issued an emergency regulation "to rectify certain unintended consequences” of the federal risk adjustment program on small group insurers under the Affordable Care Act, Financial Services Superintendent Maria T. Vullo announced on Friday. The new rule authorizes Vullo to implement a “market stabilization pool” in 2017, if DFS determines the U.S. Centers for Medicare & Medicaid Services program will hurt the small group health insurance marketplace for that plan year. The new pool would correct any imbalance caused by the way CMS calculates risk-adjustment payments, which are intended to transfer money to insurers who signed up sicker members from those who enrolled healthier members. But in New York, the program has effectively moved money from small insurers to larger ones, leading at least one carrier, Northwell Health’s CareConnect, to threaten to pull out of the marketplace. Insurers who received payments would pay into the fund, which would transfer money back to plans that were penalized by CMS. The percentage paid into the fund from risk-adjustment payments won’t exceed 30% of a plan’s award, Vullo said. CareConnect, which had complained the risk adjustment program unfairly penalized its plan, praised the state’s decision in a statement: “These steps represent critical progress toward maintaining a stable, diverse and competitive health insurance market in our state.” The insurer, which had a $41 million operating loss in the first half of 2016, owed CMS $13.3 million for 2015 and estimated in August that it might owe $53 million for the first half of 2016. DFS’ actions won’t affect risk-adjustment payments for 2016 or those that apply to plans selling policies to individuals, according to the state’s announcement