Last week, Texas seized the assets of Friday Health Plan in Texas because the insurer is insolvent as Modern Healthcare reports. More interesting to me is the risk-adjustment correlated risk problem:
OSCAR has a national footprint, but between Friday and Bright, there is $1.25 billion dollars in risk adjustment payables that are liabilities of companies that are in really poor financial health. Risk adjustment payables occur when an insurer covers a population that codes as lower expected cost/better health than the state wide average. The other insurers in Texas were (mostly) covering people who as a population code as sicker than average and thus the insurers were expecting to get $1.25 billion dollars from low risk insurers in the state. If all or a substantial chunk of the money either never gets paid or gets paid only after several years of litigation, smaller insurers that did well on their own and managed their finances appropriately might be in trouble.
Correlated risk is a nasty thing.
Anonymous At Work
Is there not a stop-gap measure that allows the risk-adjustment payees to receive the financing that they might actually need to survive? Government pays out and receives the necessity to get paid in return? I’d think “Oh, rather than this smaller company we can bully…we now expect to be sued by the government for a non-small chunk of change” would provide a strong incentive to settle, or at least not be “that guy”.
I’m pretty sure this is not good. //s. It makes me more concerned that this is happening in a governance circus like TX.