CMS Releases 2018 ACA Risk-Adjustment Data
July 2019 ~
CMS, on June 28, released its report summary of the Affordable Care Act (ACA) risk adjustment program for the 2018 benefit year.
The ACA’s risk adjustment program transfers funds in the individual and small group health insurance markets from health plans with lower-risk enrollees to plans with higher-risk enrollees to spread the financial risk and help stabilize premiums.
Despite a brief payment freeze last summer, the Affordable Care Act’s risk adjustment program “operated smoothly” last year, according to the report.
“The risk adjustment program is working as intended by more evenly spreading the financial risk carried by issuers that enrolled higher-risk individuals in a particular state market risk pool, thereby protecting issuers against adverse selection and supporting them in offering products that serve all types of consumers,” the report states.
The analysis found that 572 health insurers offering ACA plans participated in the program in 2018, and transfers between the companies totaled $10.4 billion. According to CMS, half of that amount accounts for payments distributed and the other half accounts for charges collected by the agency, since the program is required by law to be budget neutral.
The analysis found that insurers that received “relatively high paid claims amounts were more likely to receive risk adjustment payments, while issuers with relatively low paid claims amounts were more likely to be assessed charges”. Payors within the lowest quartile of claims costs were assessed a risk adjustment charge of about 12% of total collected premiums, down from 17% the year before. Payors with the highest quartile of medical claims costs received risk-adjustment payments of about 15% of their total premiums, down from 21% the year before.
According to the report, the declines in payments and charges were are largely due to changes in the state transfer formula to reduce the statewide average premium by 14%, as well as enrollment shifts toward bronze and gold plans.
The report also shows that, in 2018, the absolute value of risk-adjustment transfers across markets (excluding the high-cost risk pool) was around 7% of total premiums, down from 8% in the 2017 benefit year.
Among other changes to the program for the 2018 benefit year, the risk-adjustment methodology included a high-cost risk pool, which reimburses issuers for 60% of an enrollee’s aggregated paid claims costs exceeding $1 million. A total of 217 issuers received a high-cost risk pool payment, according to CMS.