RISE looks at recent regulatory news related to the Affordable Care Act (ACA) risk adjustment program as well as efforts to lower healthcare costs and make those costs more transparent.
Good news for ACA-compliant health plans that participated in the risk adjustment program for 2018. A new report issued by the Centers for Medicare & Medicaid Services (CMS) said that 552 of the 572 insurers (excluding the high-cost risk pool) participating in the program received a risk adjustment transfer. Twenty received a default risk adjustment charge in at least one risk pool.
Nationwide, the value of risk adjustment transfers was about 7 percent of total premiums, a 1 percent decrease of total premiums in 2017 when 654 insurers participated in the program. Transfers between the organizations totaled $10.4 billion with $5.2 billion in payments and $5.2 billion in charges.
The risk adjustment program is meant to compensate insurers in the individual and small group markets who have sicker enrollees and therefore have higher medical costs. The risk adjustment program transfers funds from plans with relatively low-risk enrollees to plans that have higher-risk enrollees. The formula should spread the financial risk across the markets and allow insurers to compete with one another based on price, efficiency, and service quality.
CMS said the latest data shows that the risk adjustment program is working as intended by more evenly spreading the financial risk carried by health plans that have higher-risk individuals in their state markets.
The findings come in the wake of a controversial year for the risk adjustment program. A U.S. District Court in February 2018 had vacated the use of the statewide average premium in the payment transfer formula for the 2014-2018 benefit years. This came after a New Mexico consumer-operated and oriented health plan claimed the risk adjustment program penalized innovative, low-cost insurance companies. In response, CMS froze payments in July but reversed its decision weeks later after stakeholders worried insurers would withdraw from the markets without the payments. That reversal was part of an emergency final rule that included the existing methodology to resume payments for the 2017 benefit year. Although a New Mexico insurer has filed a second lawsuit to block CMS from implementing the risk adjustment payment formula, the agency issued a final rule for the 2018 payments to give insurers confidence to continue participating in the markets.
Executive order for transparent pricing
President Donald Trump has signed an executive order that pushes the health care industry to show prices to consumers. Although the order lacks specifics, the administration believes that if patients know the true costs of care and can shop around for the best prices, the market will be forced to lower costs.
“For too long, it’s been virtually impossible for Americans to know the real price and quality of health care services and the services they receive. As a result, patients face significant obstacles shopping for the best care at the best price, driving up health care costs for everyone, Trump said during the signing.
The order will require the Department of Health and Human Services (HHS) to issue a proposed rule by the end of August to require hospitals to publicly post what they charge for services. The following month HHS, Labor, and Treasury must issue a proposed rule that requires providers, insurers, and self-insured group health plans to provide out-of-pocket cost information to patients before they receive care.
But industry experts aren’t convinced that the publication of health care prices will lower costs. Larry Leavitt, senior vice president for health reform the Kaiser Family Foundation, tweeted that it may actually “increase prices once hospitals and doctors know what their competitors down the street are getting paid.”
Matt Eyles, president and CEO of America’s Health Insurance Plans (AHIP), agreed, noting in a statement that publicly disclosing “competitively negotiated, proprietary rates will reduce competition and push prices higher–not lower–for consumers, patients, and taxpayers.”
Senate HELP committee releases draft legislation to reduce health care costs
Meanwhile, Senate health committee leaders have introduced bipartisan draft legislation to reduce health care costs called The Lower Health Care Costs Act of 2019. It aims to prevent surprise medical bills, reduce prescription drug prices, improve transparency in health care, invest in public health, and improve health information exchange.
Senate health committee Chairman Lamar Alexander (R-Tenn.) said he hoped the legislation could be put to the Senate floor in July.
AHIP’s Eyles had mixed opinions about the legislation. While it would protect patients from surprise medical bills, he said the organization was worried about provisions that it would strip health insurance providers and pharmacy benefit.