One state's home-grown approach to health reform has produced a few discrepancies in the implementation of the Affordable Care Act, including one big dispute between insurers over risk-sharing.
The 17 insurers represented by the Massachusetts Association of Health Plans are concerned about the trajectory of the state's risk adjustment program -- every insurer besides the largest, Blue Cross Blue Shield of Massachusetts, which is not a member of the MAHP.
MAHP insurers, especially small and new entities like the co-op Minuteman Health, fear that they will have to make big risk-sharing payments, many of them to dominant competitor BCBS, based on data of questionable integrity and applicability.
Massachusetts is using a risk adjustment formula developed by state regulators, unlike every other state in the country using the federal standard, as part of the ACA market stabilization program to balance the dynamics of sick and healthy.
Collections and payments for 2014 are still being calculated for the final quarter of the year, and are expected to take place by the summer. But not if MAHP can help it.
The state-developed formula, using membership information from an all-payer claims database and the Massachusetts Connector exchange, present so many potential problems that MAHP is asking the state's new Governor, former Harvard Pilgrim CEO Charlie Baker, to delay the program for one year, with permission from the Obama Administration
In a letter to Baker and Administration and Finance Secretary Kristen Lepore, MAHP CEO Lora Pellegrini argues that the impact of overpayments in the program coupled with the Connector's "ongoing difficulties" could have an adverse impact on insurers -- to the point of potential insolvency for some.
"A guiding principle of risk adjustment should be to ensure the competitiveness of the marketplace and a redistribution of premiums that does not threaten the solvency of certain plans," Pellegrini wrote. "As implemented today, we are not confident that such goals can be achieved and have no confidence in the integrity of the data, mere months from the scheduled transfer of tens of millions of dollars that could affect the solvency of some health plans in the state."
MAHP's 17 member insurers, including Centene, Harvard Pilgrim, Minuteman, the Neighborhood Health Plan owned by Partners HealthCare and UnitedHealthcare, collectively cover 2.6 million Massachusetts residents -- just about as many as Blue Cross Blue Shield of Massachusetts.
Blue Cross Blue Shield of Massachusetts officials are comfortable with the risk adjustment formula as it stands today. BCBS chief actuary Andreana Santangelo told the Boston Globe that their membership includes a significant percentage of individuals with chronic conditions, co-morbidities and at high risk of acute illness. Santangelo also said that the nonprofit company is actually losing money currently without the risk adjustment program.
MAHP, however, believes a one-year moratorium is needed to prevent the likes of Blue Cross from being over-compensated for its riskier membership pool -- in part because the data being used in the calculations may not be sufficient.
A number of insurers have found duplicate members, former members and the inclusion of certain populations, like the Commonwealth Care Medicaid membership, that aren't supposed to be part of the calculation.
Officials at the Massachusetts Connector have acknowledged that risk adjustment simulations for the second and third quarters of 2014 "were impacted by significant inaccuracies in the data being extracted from the all payer claims database," as MAHP's Pellegrini told the Governor.
"Such errors would significantly affect both the calculation of plans' average actuarial risk and the market-wide risk score." Moreover, she added, the "overall scope of the identified discrepancies is still unknown to MAHP and our member plans."
A one-year-delay would give insurers and regulators an opportunity to compare the state's alternative risk adjustment methodology to the federal standards being used everywhere else, or to develop validation standards, Pellegrini said.
Amid the botched second rollout of the Connector, which worked relatively well as a public insurance exchange and Medicaid enrollment system when it started in 2007, the Obama Administration has given Massachusetts a fair amount of leeway -- for instance, the approval to temporarily cover would-be exchange plan members in Medicaid and extensions for open enrollment.
The U.S. Department of Health and Human Services has extraordinary discretion in some areas of ACA regulations and programs, but the law does outline a year-by-year schedule for the risk adjustment, risk corridors and reinsurance programs. So it's not clear what the feds can go should Baker prove willing to intervene.
Although Massachusetts' 2006 health reform included many of the policies that were adapted for the ACA, the state did not create a risk adjustment program. The Commonwealth Care marketplace program was designed for individuals with incomes of up to 300 percent of the federal poverty level and who lacked employer-sponsored coverage and weren't eligible for Medicaid. Initially, it included four Medicaid managed care organizations whose payments were adjusted in part based on acuity.
As MAHP's Pellegrini told Baker, Massachusetts' market is so unique that state insurers weren't facing the same magnitude of risk associated with the transition to the new reform market. Since 1996, Massachusetts has required guaranteed issue and commuting rating regulations. That, combined with a merged market, an individual mandate, and a relatively low uninsurance rate of means that "health plans operating in the state do not expect the same uncertainty and instability as other states due to high cost utilizers," Pellegrini said.
If Massachusetts' risk adjustment goes ahead under the current formula, the insurers that stand to be the most impacted are smaller nonprofits and startups like Worcester-based Fallon Community Health Plan and Minuteman Health, which estimates that as much as 25 percent of its premium revenue might be due for redistribution.