DENVER – Health insurance cooperatives and federal officials are at odds over what’s to blame for the possibility of thousands of people having to scramble to find new coverage in 2015.
The disagreement shines a light on possible flaws with funding formulas prescribed under the Affordable Care Act, said an official with Colorado’s federally-backed health insurance cooperative. The disagreement comes after a disappointing funding announcement for co-ops last week.
The Centers for Medicare and Medicaid Services announced that health cooperatives will receive only 12.6 percent of the funding that was requested to stay afloat under the risk-corridor program.
The ACA provided nonprofit cooperatives with federal low-interest loans in an effort to establish co-ops as a means to compete in the insurance marketplace, thereby potentially lowering the price of premiums for consumers. The risk-corridor program was supposed to offset costs incurred by new providers. But when it came time for risk-based capital funding, investments were cut short through federal budget talks last year.
Colorado HealthOP is currently working with private investors in an effort to keep the nonprofit afloat. Officials with the co-op also are lobbying the administration and Congress for more funding.
Members can expect coverage through 2015, but it’s unclear whether the co-op will be available come the Nov. 1 yearly open enrollment period. Its 80,000 members – including 1,415 people in La Plata County – may need to find a new provider at that time.
The U.S. Department of Health and Human Services this week said that the risk-corridor program is just one of three programs under the Affordable Care Act aimed at assisting insurers.
An HHS official who contacted The Durango Herald pointed out that the risk-corridor program is a three-year program “whose outcome won’t be known for several more years.” For 2015, HHS will make payments to insurers who did not receive full 2014 payments before making new payments. If there’s a shortfall in 2016, then HHS will “explore other sources of funding.”
Meanwhile, the risk-adjustment and reinsurance programs remain funded. Under the reinsurance program, insurers are being paid $7.9 billion for 2014 to spread the cost of large insurance claims across all providers. The risk-adjustment program will transfer about $4.6 billion among providers to reduce a problematic trend of only insuring healthier people.
Julia Hutchins, chief executive of Colorado HealthOP, said it is not as simple as keeping a couple of ACA programs funded. She pointed out that it is critical to look at how payments have been distributed in terms of impact.
Colorado HealthOP paid $5 million to other providers in 2014 for risk adjustment. The co-op’s current budget includes $28 million for risk adjustment payable in 2015.
“This is not because our population is less risky, but because of transitional policies, data disadvantages and a flawed risk-adjustment formula,” Hutchins said, adding that the formula is biased against low-cost plans, such as those provided through co-ops.
She said the perceived flaw with the risk-adjustment formula has resulted in needing a larger risk-corridor payment.
“Our number is bigger than it should be because risk adjustment is not working,” Hutchins said. “If you look at who the winners and losers are after the premium stabilization formulas have been applied, it’s not necessarily the same plans who have been serving the largest number of newly insured or who are bearing the biggest costs.”