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Md. benefit exchange approves plan on risk adjustments

(Lisa F. Young /

(Lisa F. Young /

The board of the Maryland Health Benefit Exchange voted Friday on a solution to an issue where the state’s new reinsurance program could cause duplicative payments under the Affordable Care Act’s risk adjustment program.

Kaiser Permanente, one of the state’s two insurers on the individual market, had expressed concern that it would bear the brunt of this double payment issue, forcing the carrier to raise rates rather than lower them under the reinsurance program.

If Kaiser had issues with how the risk adjustment program and the reinsurance program worked, then it is likely other carriers would have found it more formidable to enter Maryland’s market. One of the goals of the reinsurance program has been to attract more carriers to the state.

“The important thing for consumers is that the reinsurance program will have a big impact on lowering rates for 2019,” Andrew Ratner, the exchange’s chief of staff, said. “The board has set long-term goals of bringing stability to the marketplace, getting more competition and drawing carriers to the marketplace.”

The board had two options to choose from Friday. Analysis from independent actuarial firm Wakely proposed completely eliminating the duplication of risk adjustment payments and reinsurance, an option favored by Kaiser.

The carrier had worried that with the duplicative payments, it would be forced to reevaluate its participation in Maryland’s market. Kaiser declined to comment for this story.

Instead the board chose a Maryland Insurance Administration proposal to cut the duplicative payments less aggressively to ensure less variation among rates. The proposal was favored by CareFirst BlueCross BlueShield, the larger carrier on the individual exchange. CareFirst is the recipient of the risk adjustment payments made by Kaiser, an amount Kaiser has estimated at $80 million.

“We support the Maryland exchange’s decision to adopt the MIA’s plan for accounting for the potential interaction of reinsurance and risk adjustment payments,” CareFirst said in a statement. “We believe the MIA’s plan ultimately balances the healthiest and sickest portions of the risk pool, increasing the chances of stabilizing the state’s volatile individual market.”

Volatility in the marketplace was a primary driver of the state’s decision to create a reinsurance program. Gov. Larry Hogan announced federal approval for the program last week.

Over the past couple of years, insurers have been forced to ask the insurance administration to approve higher premiums than the year before, raising rates by as much as 50 percent.

Reinsurance was proposed as an option to help keep rates stable. Estimates are that the reinsurance program will keep rate increases within single digits for 2019, and some plans could see premiums decrease. The state expects its program will have more funding than any other state reinsurance program.

“There’s a lot of optimism that because it is the biggest reinsurance program of its type in the country it will have the biggest effect on lowering premiums,” Ratner said.

This could allow new insurers to enter the market, creating more competition and potentially further lowering rates.

The risk adjustment issue has affected Maryland’s individual market in the past. Notably, Affordable Care Act co-op Evergreen Health was forced out of the market because it could not afford the risk adjustment payments.

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