Concerns over the survivability of the insurance exchanges and concerns from insurers appear to have spurred CMS to propose changes to Obamacare and to its method of risk adjustment.
The Centers for Medicare & Medicaid Services is moving to save Obamacare after the retreat of major insurers from the health insurance changes, proposing changes to the marketplaces and the law's method of risk adjustment. The changes may do little to satisfy the insurance companies that have found little success so far with Obamacare.
The changes in the proposed rule have been sought by the insurance industry for some time now, but it appears CMS may be closing the barn doors after the horses have bolted.
CMS issued the proposed annual Notice of Benefit and Payment Parameters for 2018 a couple months earlier than expected, another hint that the agency is responding to recent signs that the marketplace is failing fast and may be beyond hope of recovery.
Recent concerns over the survivability of the exchanges and concerns from insurers seem to be motivating CMS, says Morgan J. Tilleman, JD, a healthcare attorney and analyst with the law firm of Foley & Lardner in Milwaukee, WI.
"This year, large risk-adjustment payments have been blamed for exacerbating the financial struggles of some co-ops. Also, a number of lawsuits have been brought against HHS and CMS alleging that the risk adjustment formula is unfair to some issuers," Tilleman says.
"While CMS was likely going to change some of the features of the risk adjustment formula and process regardless, the controversy swirling around risk adjustment may have impacted CMS's timeline and focused attention on this issue."
The permanent risk-adjustment program is intended to compensate plans for taking on sicker enrollees with higher healthcare costs. A frequent complaint from insurers has been that the risk adjustments do not take into consideration the use of prescription drugs that make patients appear healthier than they actually are.
CMS responded by proposing that, starting in 2018, risk adjustment would factor in prescription drug data in addition to all the other conditions and illnesses used to develop a risk score. Some skeptics have said that might incentivize physicians to write unnecessary prescriptions.
"Just measuring inpatient and outpatient treatments would fail to capture these expensive conditions. However, it remains to be seen whether this change will materially change the distribution of risk adjustment payments," Tilleman says. "I don't see this change as providing a meaningful incentive to doctors to prescribe more medications, however. On a day-to-day basis, I doubt most physicians are thinking that abstractly about the financial condition of health plan issuers."
The proposed rule also would require insurers to offer a silver and a gold level plan on the exchanges, and Tilleman doubts that would go over well.
"In general, forcing insurers to offer more plans makes it more difficult to attract new issuers to the exchanges and to retain issuers currently offering coverage on the exchanges," he says.
"If an issuer believes that it can offer silver plans at a profit, but will lose money on gold plans, this requirement could deter that issuer from entering or staying in the exchanges."
Tilleman also suspects that the pending congressional lawsuit against cost-sharing reduction payments could put issuers with silver plans in a very difficult position. Silver plans with extensive cost-sharing reductions are very "rich" in terms of actuarial value, but have silver-level premiums, he notes.
If the courts delay or prevent the payment of cost-sharing reductions, these silver plans may become wildly unprofitable at the filed premiums, particularly if the cost-sharing reduction payments are stopped mid-year, he says.
The impact of the proposed rule is uncertain, but Tilleman cautions against reading too much doom and gloom into the CMS effort.
"CMS is dedicated to the success of Obamacare and must be feeling the pressure to improve its stability," he says. "However, every large federal health program has been the subject of this sort of adjustment, and those programs, such as Medicare Advantage and the Part D benefit, survived."
Gregory A. Freeman is a contributing writer for HealthLeaders.