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Obamacare Co-Ops Owe Funds Under Risk Adjustment

By Erin Mershon, CQ Roll Call

July 1, 2016 -- Nearly all of the remaining health insurance co-ops set up under the health overhaul owe the federal government millions of dollars under the law's risk adjustment program, according to new data released Thursday. Many of those and other small plans have lobbied against the program's rules, calling them unfair.

One co-op, Evergreen Health in Maryland, filed a lawsuit earlier this month seeking to block what it said would be a fee as high as $22 million under the program. Its final tab was $24.2 million. Other co-ops owe more: Health Republic of New Jersey owes $46.3 million. Illinois' Land of Lincoln plan owes $31.8 million. Connecticut's HealthyCT and New Mexico's Health Connections owe nearly $13.4 million and $14.5 million, respectively.

Just one co-op will receive payments under the program: Montana Health Cooperative, which will get about $6.1 million. Massachusetts conducts its own state-wide risk adjustment plan. Its co-op also will owe money.

"It's an outrageous sum. But if you look at the other co-ops and other new entrants like the Oscars of the world, almost all of them got hit fairly significantly to very significantly," said Peter Beilenson, president and CEO of Evergreen Health.

Most of the funds Evergreen pays in would go to CareFirst, the co-op's biggest competitor in Maryland, which is set to get about $29 million back from the government under the program. The sum will account for about 28 percent of Evergreen's revenue, but only a fraction of a percent of CareFirst's, he said.

Beilenson said he plans to expand his lawsuit to block the charge later on Thursday. He said more than 20 other companies, some of which are co-ops, have asked for more information about Evergreen's lawsuit. Many of those are also being charged significant sums.

The charges could also lead to more closures for the co-ops. In the past two years, more than a dozen of the law's 24 original co-ops have shuttered. The risk adjustment program reallocates funds from insurers with healthier customers to those with sicker customers and was set up as a way to stabilize the fledgling insurance markets created under the health law (PL 111-148, PL 111-152).

Larger insurers and those who saw profits in the program's first year have said the formula was laid out far in advance and that changes would increase uncertainty in an already uncertain market.

One plan, Blue Cross Blue Shield of Florida, will get a payout of more than $350 million. Several others, including Blues plans in Michigan, North Carolina and Pennsylvania, will get more than $80 million each.

Federal officials have said they plan to adjust the program in later years, through future rulemaking. They emphasize that an insurer's size does not predict their risk adjustment results; rather, their claims experience is more predictive.

"We continue to work with companies and states to refine the program so that risk adjustment works for both insurance companies and consumers shopping for affordable coverage," said Centers for Medicare and Medicaid Services spokesman Aaron Albright in a statement.

The report also detailed insurers' payments under a reinsurance program of the 2010 law. Nearly 500 insurers will receive about $7.8 billion in payments for 2015. That program, unlike risk adjustment, is set to expire after 2016.

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