Come for the politics, stay for the snark.

No one could have predicted…

Republicans can’t even be trusted with their own money.

This really is a full service blog.

He really is that stupid.

Consistently wrong since 2002

“Squeaker” McCarthy

They fucked up the fucking up of the fuckup!

It’s easy to sit in safety and prescribe what other people should be doing.

When someone says they “love freedom”, rest assured they don’t mean yours.

“And when the Committee says to “report your income,” that could mean anything!

The party of Reagan has become the party of Putin.

Seems like a complicated subject, have you tried yelling at it?

Let’s delete this post and never speak of this again.

When your entire life is steeped in white supremacy, equality feels like discrimination.

Their freedom requires your slavery.

People are complicated. Love is not.

Nancy smash is sick of your bullshit.

A sufficient plurality of insane, greedy people can tank any democratic system ever devised, apparently.

Make the republican party small enough to drown in a bathtub.

It’s always darkest before the other shoe drops.

Hot air and ill-informed banter

Authoritarian republicans are opposed to freedom for the rest of us.

Whoever he was, that guy was nuts.

That’s my take and I am available for criticism at this time.

You are here: Home / Anderson On Health Insurance / The ACA and Medicaid risk corridors

The ACA and Medicaid risk corridors

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Bob Herman is looking the slow withdrawal from the Exchanges by United Healthcare and makes a very good point about the overall book of business for UHC:

One of the areas that insurers have been making good money on in the past couple of years has been on Medicaid expansion managed care.

Not all states use third party insurers to run their Medicaid programs. Some will use an insurer solely for administrative support and other states run basically their entire program in-house with state employees. However most states will use at least some Medicaid managed care companies to run at least some of their Medicaid program.

These companies get a fixed fee per covered individual per month and are told to cover them. This system works fairly well when the populations are reasonably stable and reasonably predictable. Legacy Medicaid is reasonably stable and reasonably predictable as it covers the very sick, the poor, the working poor pregnant and low income kids. When an insurer is working off of a large enough sample, the conclusions drawn from 2012 data and applied to 2013 data will be close enough.

However there has been a massive discontinuity in the data in the form of Medicaid Expansion. The population being covered by Expansion is healthier than the adult population covered by Legacy Medicaid. But the question in 2014 and 2015 when states were setting their managed care rates was by how much healthier?

No one had a great clue. So quite a few states set their per capita monthly rate fairly high with risk corridors to capture most of the overpayment.

Setting rates high made sense for state Medicaid entities for two reasons.

First, Medicaid expansion in 2014, 2015, 2016 is 100% federal money. Overspending by $30, 40, or $150 million dollars won’t get a Medicaid director hauled in front of her state Senate’s oversight committee. Instead, it pumps money into the state and builds vested constituencies that want to push for continued expansion. Risk corridors would capture most of the over-payment back over the long run and allow for a slow glide path to actuarially fair rates informed by real data.

Secondly, there was significant concern about how much catch-up care would be needed. Twenty eight months into Medicaid expansion, most of the catch-up care probably has worked its way through the system, but a high initial rate was needed to cover the probability of high catch-up care costs.

High rates with partial clawbacks meets clinical needs and it meets political needs of quite a few states with Medicaid Managed Care models. A side-effect of that is companies with significant MCO exposure should be making serious money on Medicaid for the first few years of Expansion.

Reader Interactions

19Comments

  1. 1.

    Scout211

    UHC was awarded a long term contract for TriCare for the western region a couple of years ago. I have often wondered if this contract was affecting their decision about withdrawing from the exchanges.

    TriWest Health Alliance ran the TriCare western region for many years and was very vocal about losing the contract to UHC.

    I wondered at the time why there would be so much competition for a government insurance program. Now I know.

  2. 2.

    Germy

    Once a week I wander over to Kunstler’s rant to see what he has to say. This week:

    Health care is now such a blatant, odious, and ruinous racket that it is a little hard to believe that it hasn’t ignited an outright revolution or, at least, a workplace massacre in some insurance company C-suite. It is a well-known fact that most Americans don’t even have $500 to pay for a car repair. How are they supposed to cope with a $5,000 deductible health insurance incident? Answer: they can’t. Their mental health is destroyed in the process of attempting to fix their physical health. Not uncommonly, they have to declare bankruptcy after a routine appendectomy or a visit to the emergency room to set a broken arm. Sometimes, they don’t even bother to go to the doctor, seeing clearly how this plays out. The pharmaceutical industry has, of course, been allowed to convert itself into a simple extortion racket. Got an unusual kind of cancer? We have something that might help. Oh, it costs $43,000 a month….

    What kind of a polity allows this cruel and indecent grift to go on? Why, the Obama administration, which allowed the health insurance company lobbyists and their colleagues in Big Pharma to “craft” the Affordable Care Act — the name of which must be the biggest public lie ever floated.

  3. 3.

    Brendan in Charlotte

    UHC always makes bank on employer plans. I had them at a previous job, and their rates weren’t bad. I’ve got Cigna now, and often wish I had UHC again…

  4. 4.

    dr. bloor

    @Germy:

    It is a well-known fact that most Americans don’t even have $500 to pay for a car repair. How are they supposed to cope with a $5,000 deductible health insurance incident?

    Things would be a lot simpler and cheaper if UHC could just total Grandma and send along a few thousand bucks to the family to buy a new grandma.

  5. 5.

    Yutsano

    @Brendan in Charlotte: Cigna was my old insurer at my old job before the IRS and they sucked massive donkey balls. Then halfway through my tenure there we switched to a Blue and it was a night and day difference. I don’t think they’re on FEBHP in my state but the Blues in WA are a so good I’m not sure I’d switch.

  6. 6.

    Brendan in Charlotte

    @Yutsano: Don’t I know it. Already hit my dental limit for the year, and my dentist wants to see me 3 more times…Gonna need to get them to dial it back to once more…It’s also no coincidence that I had UHC while I was married, and they complained because my wife and stepson (age 7 at the time), were using the insurance, like they should.

  7. 7.

    HRA

    My son works for a public transportation authority in a supervisory position and funded by the state. He has Blue Cross and Blue Shield. Although it’s not the same Blue Cross and Blue Shield I had in my 1st job. They give him a card for $3,000 that can only be used at a certain time. Yes, it is not something I fully understand. He went to pick up his meds at the pharmacy and told he had to pay $700. He left them at the pharmacy. He also told me he received a bill for thousands when his daughter has surgery last year. He got that straightened out and now he has to do the same for his meds. As he was explaining these to me, I asked him if it was somehow the ACA before he told me no and stated his provider. I already have Dad here ranting each day after ACA and have kept this to myself. We are not on ACA.

  9. 9.

    Joel

    @Germy: The problem with the “rare cancer” argument is that, even sold at cost, those drugs would be insanely expensive. That’s the problem with rare diseases. The other problem is that it’s very hard to develop drugs for common diseases.

  13. 13.

    lahke

    Hi: sorry, I’m not tracking on why United is leaving the exchanges if they are hauling in all of this dough.

  16. 16.

    Socialistfeminazi

    I work for the HCE market at UHC. Today, as I have been predicting for 2 months now, they pulled us in a room and basically told us to look elsewhere for jobs, or be fired. From my tiny view, UHC did not adequately predict what would happen on the HCE. They were understaffed and continue to be so to service customers’ billing and claims, and a whole host of other issues that I really can’t go into in a public forum. Suffice to say, a glass of wine or two is probably is going to be dinner tonight.

  17. 17.

    pseudonymous in nc

    It’s going to be a pain in the a-hole to have to jump through the same hoops over prior authorizations and referrals and the usual shit with a new insurer next year that we did with UHC this year — that is, if there’s any insurer in NC actually offering ACA plans.

    This is what happens when private corporations who live and die by stock prices and quarterly profits dictate terms to states. If you get to make bank from Medicare and Medicaid, you should have to take your lumps and offer ACA exchange plans. Everybody knew there’d be a treatment deficit that needed to be addressed.

    They were understaffed and continue to be so to service customers’ billing and claims

    This does not surprise me.

  18. 18.

    Germy

    @Roger Moore: Citation needed? Are you serious?

    Since 2013, the federal reserve board has conducted a survey to “monitor the financial and economic status of American consumers.” Most of the data in the latest survey, frankly, are less than earth-shattering: 49 percent of part-time workers would prefer to work more hours at their current wage; 29 percent of Americans expect to earn a higher income in the coming year; 43 percent of homeowners who have owned their home for at least a year believe its value has increased. But the answer to one question was astonishing. The Fed asked respondents how they would pay for a $400 emergency. The answer: 47 percent of respondents said that either they would cover the expense by borrowing or selling something, or they would not be able to come up with the $400 at all.

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