seema_verma-214x300-6991256The Trump administration’s move this week to suspend the Affordable Care Act’s “risk adjustment” program leaves more than $300 million in payments to and from New York’s health plans in limbo and further destabilizes the state’s ACA market.

The company with the most to lose is UnitedHealth Group, whose New York affiliates were due to collect as much as $212 million in risk adjustment payments for 2017.

The biggest potential winners are CareConnect, a now-defunct plan affiliated with Long Island’s Northwell Health, which is due to pay as much as $121 million, and Fidelis Care, with a potential looming debt of $82 million.

The gains and losses for all affected New York plans are detailed in the chart below.

screen-shot-2018-07-11-at-4-51-16-pm-8402332

It’s too soon to say exactly how the suspension will affect ACA consumers, which depends on the complicated interplay of future court rulings, actions by federal officials and possible intervention by the Cuomo administration. But the uncertainty itself is a further blow to ACA insurance markets that have been experiencing rising premiums and declining enrollment.

The ACA’s risk adjustment program is meant to discourage plans serving the small-group and non-group insurance markets from trying to “cherry-pick” healthy customers as a way of minimizing claims and boosting profits. Under the program, the state diverts a portion of premium revenues from plans with lower-risk customers and redistributes that money to plans with higher-risk customers.

A similar program is a longstanding feature of Medicare Advantage. Its implementation under Obamacare has been more controversial, with critics charging that the risk-scoring system gives an unfair advantage to larger, older companies—which have more data about their patients—while effectively penalizing smaller, younger competitors.

Especially vocal in opposition was CareConnect, which faced a nine-figure hit from the program while it lost money on ACA plans – even as more profitable competitors collected large payouts.

In 2016, state Department of Financial Services Superintendent Maria Vullo said in a letter to federal health officials that risk adjustment “has created inappropriately disparate impacts … and unintended consequences.” Vullo later issued emergency regulations that would have reduced payments into and out of the risk adjustment program by up to 30 percent.

That policy change had a significant effect on 2018 premiums for some plans and drew a lawsuit by UnitedHealth. Still, CareConnect opted to shut down at the end of 2017.

Early this year, a federal court in New Mexico invalidated the federal risk adjustment formula on procedural grounds. On Monday, Centers for Medicare & Medicaid Services (CMS) director Seema Verma (photo) chose to suspend the program rather than seeking a stay while the case is appealed. Some saw that decision as a strategy to further undermine the functioning of the ACA, which President Trump opposes.

Among those assailing the move was Governor Cuomo, who declared: “Suspending the risk adjustment program is the Trump administration’s latest attempt to do administratively what they couldn’t do legislatively: dismantle the Affordable Care Act.”

Ironically, Cuomo responded with executive action of his own: ordering the Department of Financial Services to explore creating a state-based risk adjustment program, a step that arguably should receive legislative approval.

The governor’s statement made no mention of his administration’s previous criticism of risk adjustment. It also implied that the program was aimed at reducing costs, while in fact it’s a zero-sum game that increases some plans’ costs, and therefore premiums, while saving money for others.

The future of risk adjustment is subject to a long list of uncertainties:

  • The New Mexico ruling could be overturned by a higher court or upheld on appeal.
  • CMS, which has revised its regulations for 2019 to address the procedural flaw, could do the same for prior years or leave those payments in limbo.
  • The state could succeed in establishing its own program, or it could be blocked in court.
  • The state’s plan to limit risk adjustment payments in 2017 and 2018 could be overturned by a judge or become moot if the payments never happen.

About the Author

Bill Hammond

As the Empire Center’s senior fellow for health policy, Bill Hammond tracks fast-moving developments in New York’s massive health care industry, with a focus on how decisions made in Albany and Washington affect the well-being of patients, providers, taxpayers and the state’s economy.

Read more by Bill Hammond

You may also like

‘Clusters’ Drive a Widespread Surge in New York’s Coronavirus Infection Rates

New York's coronavirus infection rates have surged to their highest levels since May, pushing 10 counties – including Brooklyn, Rockland and Orange – above a threshold that the Cuomo administration uses to justify travel restrictions on other states. Read More

A Federal Emergency Rule Is Inflating New York’s Medicaid Enrollment

Strings attached to federal coronavirus relief funding appear to be inflating New York's Medicaid enrollment – and costs – at a time when the state faces unprecedented deficits. Read More

The CDC’s Nursing Home Death Count Is Even Less Complete Than New York’s

The result is that a major public health disaster affecting New York's nursing home residents is not being accurately documented by either of the agencies responsible for protecting them – because state officials are refusing to share the true numbers, and federal officials haven't yet asked for them. Read More

The DOJ’s Probe of Coronavirus in Nursing Homes Appears to Leave Out Most Victims

The U.S. Justice Department's newly announced inquiry into coronavirus in New York's nursing homes comes with a crucial caveat: It will look only at government-operated facilities, which represent a small fraction of the state's nursing-home industry. Read More

State’s Per-Recipient Medicaid Spending Rises to 3rd Highest in the U.S.

New York's per-recipient Medicaid spending has soared to the nation's third highest rate, a sign of fiscal trouble for one of the state's most important programs. Read More

New York Medicaid Spending Is Projected to Jump 6% in Fiscal Year 2021 (UPDATED)

Despite a round of cost-cutting this spring, New York's Medicaid spending is on track to jump by 6 percent this year thanks to a massive influx of federal aid. Read More

New York Has Widened Its Lead in Per-Capita Spending on Medicaid

New York's per-capita Medicaid spending soared to more than double the nationwide rate in 2018, widening its gap with the other 49 states. Read More

New York’s Medicaid Enrollment Surges to an All-Time High

New York's Medicaid program is growing at its fastest rate in six years, with a quarter-million additional enrollees landing in the safety-net health plan during the first three months of the coronavirus pandemic.  Read More

Subscribe

Sign up to receive updates about Empire Center research, news and events in your email.

CONTACT INFORMATION

Empire Center for Public Policy
30 South Pearl St.
Suite 1210
Albany, NY 12207

Phone: 518-434-3100
Fax: 518-434-3130
E-Mail: info@empirecenter.org

About

The Empire Center is an independent, non-partisan, non-profit think tank located in Albany, New York. Our mission is to make New York a better place to live and work by promoting public policy reforms grounded in free-market principles, personal responsibility, and the ideals of effective and accountable government.