Members of a health insurance exchange agency advisory group in the Midwest are thinking about the inner workings of the state's exchange program.
The Minnesota Health Insurance Exchange Advisory Task Force has been talking about how the state should manage swings in health insurance risk in 2014, when major provisions of the Patient Protection and Affordable Care Act of 2010 (PPACA) are set to take effect.
PPACA created three mechanisms that are supposed to help keep PPACA from swamping some insurers with crushing new waves of health claims:
- A 3-year risk corridor program.
- A 3-year reinsurance program.
- A health insurance exchange-managed risk-adjustment program.
An advisory task force work group presented a report on the topic at a recent task force meeting.
The Minnesota work group noted that PPACA already requires the federal government to manage the PPACA risk corridor program, and that the task force already has decided to let the federal government handle the PPACA reinsurance program.
Although Minnesota has been helping to implement a PPACA exchange, not shutting PPACA out, the state lacks the ability to set up the kind of risk-adjustment system that PPACA would require, the work group said.
Because of that lack, "the U.S. Department of Health and Human Services should administer the risk-adjustment program on Minnesota's behalf," the work group said.
The work group said the Minnesota exchange could always go back and take over management of the risk-adjustment system later, once it has the ability to set up and run the system.
The PPACA exchanges
Drafters of PPACA included the exchange provisions in an effort to help consumers and small employers do a better job of shopping for health coverage.
Starting late in 2013, the exchanges, or Web-based health insurance supermarkets, are supposed offer individual consumers, families and small groups menus of standardized, high-quality health plan options. Low-income and moderate-income consumers and some small groups are supposed to be able to use new federal tax credits to pay for the coverage.
Both inside and outside the PPACA exchange system, PPACA is supposed to require health insurers to sell individual and small group coverage on a nearly guaranteed-issue basis.
Insurers will be able to take an applicant's age into account when pricing coverage for that applicant but not the applicant's state of health.
Some states are letting the U.S. Department of Health and Human Services (HHS) provide all exchange services for their residents. Other states are building their own exchange programs.
PPACA risk management provisions
Many health policy specialists -- including health policy specialists who say they support PPACA -- have suggested that exchanges, insurers and regulators need to come up with safeguards to keep people from waiting until they are sick to buy and pay for coverage, and to keep the consumers with the highest claims from clustering in certain health plans, or certain types of plans, and driving up those plans' loss ratios.
HHS has posted a description of the PPACA risk management provisions on the HealthCare.gov website.
The risk corridor program would affect "qualified health plans" (QHPs) -- the health plans that participate in health insurance exchanges -- from 2014 through 2016. If a QHP has costs that are at least 3 percent lower than the QHP's cost projections, the QHP is supposed to share some of those savings with HHS. HHS is supposed to use the cash payments from the low-cost QHPs to send risk management payments to QHPs with costs that are at least 3 percent higher than those QHPs had predicted. T
The reinsurance program could affect any health plan in a state's individual market from 2014 through 2016. Either the state or HHS will collect reinsurance payments from all health insurers, self-insured group health plans and third-party administrators (TPAs) in a state. The reinsurance program will provide reinsurance payments for health insurers in the individual market that cover people with high medical costs, officials say.
The risk-adjustment program is supposed to be a permanent program that would transfer funds from the health plans with the lowest-risk enrollees to the plans with the highest-risk enrollees. The program would affect all non-grandfathered plans in the individual and small group markets, either inside the exchange system or outside the exchange system. A state with an HHS-certified exchange program could choose whether or not to set up a risk-adjustment program. Either the state or HHS could come up with a privacy-protecting method to use enrollees' health data to allocate carriers' risk-adjustment program payments.
What the Minnesota work group said
To run a good risk-adjustment program, Minnesota would need to have a centralized source of data on enrollee health risk factors, the work group said.
Minnesota already does have an "all-payer claims database," but the state does not have the authority to use the database to run a risk-adjustment program, the work group said.
"Work group members generally agree the potential benefits of pursuing state-based risk adjustment without authority to use the state’s all-payer claims database will likely not outweigh the effort associated with developing and implementing that methodology," the work group said.
In the short run, letting HHS handle the risk-adjustment program seems to be the best solution, but, in the long run, the state may still decide it wants to run its own risk-adjustment program, to tailor the program to suit the Minnesota market, the work group said.