ACA Flaw Hits NM Carrier

N.M. Health Connections Will Remain in Business Despite $9 Million Hit

BY DENNIS DOMRZALSKI New Mexico Health Connections, the nonprofit health plan formed through the Affordable Care Act, just took a $9 million hit to its bottom line because of what Insurance Superintendent John Franchini said is a flawed formula in the ACA that punishes insurers that keep people healthy. But despite that hit, the four-year-old insurer is in no danger of going out of business, Franchini told ABQ Free Press Friday. “Their surplus ratio is completely adequate for us, and they are making plans to readjust their budgets for the next two years and we expect them to move forward as a strong, viable health insurance carrier in New Mexico,” Franchini said. “There is a lot of hysteria and a lot of lemmings running around with their heads in a panic. We are not going to shut them [NMHC] down.” Franchini said NMHC will have a risk-based-capital, or surplus ratio of 450 percent after the $9 million hit. That's a little shy of the ACA's goal of 500 percent, but it is more than adequate, Franchini said.

Why the $9 million penalty?

Since it began insuring members at the beginning of 2014, NMHC has billed itself as an innovative insurer that keeps its members well and out of hospitals through rigorous case management and other innovative practices. For instance, it has no co-payments for many generic drugs that are designed to control chronic conditions. But according to Franchini and Health Connections CEO Dr. Martin Hickey, the company might have done too good a job of keeping people healthy. On Thursday, the U.S. Centers for Medicare and Medicaid Services ordered NMHC to pay $9 million into a risk-adjustment, or market-stabilization program that is supposed to compensate insurers that have a higher percentage of really sick people than their competitors. Under the ACA's risk corridor program, insurers that sell on the federal insurance exchanges get money back from the government if their losses are greater than a certain amount. And, insurers whose profits exceed a certain amount have to pay money to the government. Thursday's assessment by the CMS was for 2015 benefit year. But, strangely, NMHC lost $23 million last year. And Blue Cross and Blue Shield of New Mexico, which also said it lost money on its exchange business in 2015, got $43.7 million back from the government for 2015, CMS said. Presbyterian Health Plan got $3.6 million back from the feds, and CHRISTUS Health Plan was penalized $433,100. Molina Health Care of New Mexico will get back $35,092.

The flaw in the ACA

Franchini said he will talk with federal officials next week about what he said is a system that punishes insurers that keep people healthy. “I will tell CMS what I have been telling them for the past two years, and that is that the system is flawed and it is completely wrong,” Franchini said. “It penalizes those companies that make people well and don't charge them, and it rewards companies that don't make people well and that charges them more. It's the opposite of what it should be. “The company that bills more for medical costs gets more credit and this is exactly the opposite of what the ACA is philosophically supposed to be doing.” Hickey also said the system was flawed. “Unfortunately for us at New Mexico Health Connections, this flawed process doesn't take into account [insurance] plans that do an exceptional job of adopting a patient-centered model of care that keeps people healthier a lower costs. Because of our innovative approach, NMHC is being penalized. “CMS has thus far been unsuccessful in adopting a risk-adjustment approach that allows for the type of innovation NMHC offers. NMHC will continue to fight for such an approach because it is in the best interest of improving the health of our members.” Hickey added that the company “will not be materially impacted by this risk-adjustment fee. Our plan remains on solid financial footing, with strong reserves.”

Less competition?

And, the National Alliance of State Health CO-OPs on Friday also blasted CMS' risk-adjustment transfers, saying that the ten remaining co-ops that were formed through the ACA owe nearly $150 million in risk-adjustment payments. “Risk adjustment continues to be anything but a market-stabilizing program,” said Alliance CEO Kelly Crowe. “The payments released yesterday once again punish many CO-OPs—as well as other small, rapidly-growing, and innovative health plans—while rewarding many large and established health insurers. It's difficult to believe this was the intended result when the so-called 3Rs were included in the Affordable Care Act. “One thing remains abundantly clear: as currently designed, risk adjustment will only lead to reduced competition, higher premium rates, and deprive many Americans of the choices they desire in health insurance.” Dennis Domrzalski is an associate editor at ABQ Free Press. Reach him at dennis@freeabq.com    

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