For health insurers, latest Affordable Care Act move creates more unknowns

The roller coaster ride continues.

Following a Trump administration move to delay certain payments under the Affordable Care Act, health insurers last week responded with exasperation over what they called the latest dose of uncertainty in a market that has been trying to find its footing.

The administration cited a recent court ruling in explaining its decision to put a hold on risk adjustment transfers worth more than $10 billion across the individual and small group insurance markets.

Health plans warned the decision could force premium hikes for next year, or force insurers to drop out of the markets. Late Thursday, the federal government issued guidance saying there shouldn't be a problem related to risk adjustment collections and payments in 2019 — a move that some saw as an attempt to calm the market.

"Before, the administration had been silent about what this would mean for 2019, and that caused insurers to consider raising rates," said Cynthia Cox, a researcher with the California-based Kaiser Family Foundation, via e-mail. "It's hard to say how they will act now."

Earlier this month, the federal Centers for Medicare and Medicaid Services (CMS) announced it would freeze transfers that shift money from some insurers in the individual and small-group markets to carriers that cover more people with expensive health conditions.

Since the risk adjustment program is part of the ACA, health-law defenders saw the move as the latest in a series of steps by Republicans in Congress and the Trump administration to sabotage the ACA. The steps include removing the health law's tax penalty for people who lack coverage, new rules to promote coverage outside ACA markets and efforts to block funding for certain health-law programs that promote coverage.

Some critics of the moves prefer to say they have had the effect of undermining the health law. Conservatives offer a variety of defenses, saying consumers should have more options and arguing that funding wasn't authorized for the ACA's "risk corridor" and "cost-sharing reduction" programs.

The latest chapter involves ACA payments meant to make sure carriers don't have incentives to recruit into their health plans only people who use less health care. The financial transfers apply only to the relatively small markets where individuals and small employers purchase coverage.

In Minnesota, about 150,000 people this year are buying coverage in the individual market, which primarily serves people under age 65 who are self-employed or don't get job-based coverage. About 310,000 state residents are covered by small employer health plans, which cover groups of 50 people or less.

The risk adjustment transfers in 2017 have an overall value of more than $10 billion, split evenly between insurers that pay into the program and those that receive money. About $7.5 billion in transfers would happen between carriers in the individual market, CMS said; the rest are in the small group market.

"It costs taxpayers nothing," said Jim Schowalter, chief executive of the Minnesota Council of Health Plans. "It's simply one insurer paying another based upon established rules so that premiums can be set as low as possible."

A Star Tribune analysis of CMS data suggests that Minnetonka-based UnitedHealthcare is owed about $168.3 million for 2017, mostly for its business selling coverage to small businesses. It's unclear, however, whether the figure might change, since a big chunk of the money is related to UnitedHealthcare's business in New York.

Two years ago, New York insurance regulators issued emergency regulations related to the 2017 risk adjustment program, saying in a statement that it "has created inappropriately disparate impacts and unintended consequences among health insurers in New York."

Three of Minnesota's nonprofit health plans — Blue Cross and Blue Shield of Minnesota, Medica and UCare — are expecting to receive payments worth a total of about $71.7 million for 2017. The largest single sum is $44.2 million at Eagan-based Blue Cross, which in a typical year would expect the money in September or October.

In the individual market, financial results for 2017 at Blue Cross were a striking reversal after several years of losses. Due in part to the profitability of the business last year, Blue Cross estimates it will have to pay "medical loss ratio" rebates to consumers mandated by the ACA.

"If we do not receive those risk adjustment dollars, that will have an impact on 2018 results and amounts owed as MLR rebates," Blue Cross said in a statement.

At Minnetonka-based Medica, officials are watching the risk adjustment situation closely but don't see a need right now to boost premiums or pull products, said Geoff Bartsh, a vice president with the health plan. He noted that Minnesota HMOs have dealt with much bigger payment withholdings in the past.

"The bigger concern to us is the potential uncertainty long term about the [risk adjustment] program," Bartsh said in a statement. "This level of uncertainty creates greater risk to insurers that we may need to account for."

Bloomington-based HealthPartners expects to pay about $68.5 million. In past years, plans that owed money for risk adjustment typically paid during August, said Dave Dziuk, senior vice president and chief financial officer. With the current delay, HealthPartners will hold onto the cash longer, but the insurer assumes that "we will be asked to send in the money at some point," Dziuk said.

For now, HealthPartners doesn't imagine changing 2019 premiums due to the delay. The key concern in Minnesota is that the individual market here was just beginning to stabilize.

"What we need is just a stable regulatory platform to be implemented," Dziuk said, "because this affects people's lives."

The delay in risk adjustment payments shouldn't boost premiums next year, either because the federal government will quickly resolve the issue or state regulators won't allow it, said Chris Condeluci, a benefits lawyer who was a Republican staffer on the Senate Finance Committee when the ACA was drafted.

CMS cited a February decision by a federal court in New Mexico when explaining why it was putting a hold on risk adjustment collections and payments. Condeluci downplayed the idea that the move amounts to sabotage, because it hasn't been followed by political rhetoric about the wisdom of the New Mexico court or the failings of the ACA.

"I think the conventional wisdom is that [the federal government] will try to resolve this in a manner that results in the least amount of disruption," he said.

Tim Jost, an emeritus professor at Washington and Lee University School of Law, said the delay in risk adjustment payments alone may not have a direct impact on premiums next year. But he added: "The fact that every week there's a new problem that [comes] up in the market is probably not a bad reason for increasing premiums to cover risk."

Christopher Snowbeck • 612-673-4744