Arkansas insurance companies will receive more than $78 million to offset the cost of insuring patients whose covered medical expenses last year totaled more than $45,000 each, according to a federal report.
The bulk of the money -- more than $64 million -- will go to Arkansas Blue Cross and Blue Shield, which was the only company offering plans in every county on the state's health insurance exchange.
Under another provision of the federal health care overhaul law, the Little Rock-based insurer will receive an additional $14.8 million from other insurance companies to help pay the cost of insuring customers expected to have high medical expenses based on age, sex and medical diagnoses.
The payments are being made under three programs established under the 2010 Patient Protection and Affordable Care Act to hold down premiums as key provisions of the federal law took effect last year.
The provisions include prohibiting insurance companies from denying people coverage or charging them higher premiums based on their medical histories. Since Jan. 1, 2014, the law also has barred insurers from charging women more than men, and has limited how much more they can charge older people than younger people.
The law also has required insurance policies to cover certain services, including some, such as therapy for the developmentally disabled, that most policies didn't previously cover.
The payment programs set up by the Affordable Care Act prevented insurance premiums nationally from rising significantly last year and this year, according to Cynthia Cox, associate director of health reform and private insurance research at the Menlo Park, Calif.-based Kaiser Family Foundation.
Some insurers already are citing the phasing out of the reinsurance program -- the one that will pay the most to the insurance companies -- as a reason to raise rates next year, she said.
"Across the market, I would expect premiums to start going up faster than they have been," Cox said.
Arkansas Insurance Department officials don't plan to release information about proposed rates for next year for plans on Arkansas' insurance exchange until September, when the rates are expected to be approved by the federal government, department spokesman Ryan James said.
The reinsurance program will offset the cost of insuring customers who buy insurance on their own, rather than with the help of an employer.
The program will fully reimburse the insurance companies for the portion of a customer's covered medical bills that falls between $45,000 and $250,000, meaning a company would receive $205,000 for each customer whose covered costs totaled at least $250,000.
Nationwide, insurance companies will receive $7.9 billion under the reinsurance program for last year's expenses, according to the report by the U.S. Department of Health and Human Services' Centers for Medicaid and Medicare Services. The payments are expected to be made starting next month.
In Arkansas, Arkansas Blue Cross and Blue Shield will receive $64.7 million, St. Louis-based Centene Corp. will receive $6.9 million and Little Rock-based QualChoice Health Insurance will receive $4.3 million.
Along with the national Blue Cross and Blue Shield Association, which offered plans through Arkansas Blue Cross and Blue Shield, those companies were the only ones that offered plans last year on the state's federally run insurance exchange.
The bulk of the plans on the exchange cover participants in the state's private-option program, which uses federal Medicaid funds to pay for insurance for low-income Arkansans.
Centene, which markets plans under the name Ambetter Arkansas, offered exchange plans in 29 counties last year. QualChoice offered exchange plans in 51 counties.
Both companies expanded their offerings to include every county this year. Next year, Minnetonka, Minn.-based UnitedHealth Group also has applied to offer plans on the exchange in every county.
Payments due to companies that did not offer plans on the exchange last year include $2.3 million for Assurant Inc.'s Time Insurance Co., more than $256,000 for United Healthcare Life Insurance Co., and more than $29,000 for Humana Insurance Co.
The money for the reinsurance payments came from a $63 fee charged last year for every person covered under an individual or group health insurance policy. This year, the fee dropped to $44 per person.
Under a program known as risk adjustment, insurance companies with high percentages of customers in the individual and small-business markets who are projected to have low medical costs make payments to a fund, which then pays companies with a greater percentage of customers projected to have high medical costs.
Arkansas Blue Cross is set to receive $14.8 million under that program, including $14.4 million based on its individual market enrollment and $381,000 based on its small-group enrollment.
Other companies that will receive risk-adjustment payments include United Healthcare Insurance Co., which will receive about $387,600; Blue Cross' HMO Partners, which will receive $210,300; Humana, which will receive $95,600; and United Healthcare Life Insurance Co., which will receive $71,100.
Companies expected to make payments under the program include Centene, which owes $8.6 million; QualChoice, which owes $6 million; and United Healthcare Insurance Co. of the River Valley, which owes $590,600.
Seven other companies owe smaller amounts totaling about $370,500, according to the report.
Including private-option enrollees and others, Arkansas Blue Cross and Blue Shield was insuring 246,210 people in the individual insurance market at the end of last year, or about 76 percent of the market, according to the Arkansas Insurance Department.
Centene was covering the next-highest total, 38,591, followed by QualChoice, which was insuring 26,748.
As of June 30, Arkansas Blue Cross had enrolled 140,700 customers in the private option, representing about 64 percent of the more than 218,000 Arkansans in the program.
Max Greenwood, a spokesman for Arkansas Blue Cross, said in an email that the company paid about $25 million in fees under the reinsurance program last year.
As the only company offering plans on the exchange statewide last year, Arkansas Blue Cross expected to have a high number of high-risk enrollees, including many people who were previously covered by state and federal programs for people with costly medical conditions, she said.
Offering the exchange plans would have been "much riskier" without the reinsurance and risk-adjustment programs, Greenwood said.
Along with a third program, known as risk corridors, the reinsurance and risk-adjustment programs "eased the transition from the pre-ACA markets," she said.
The Affordable Care Act calls for the reinsurance fee to provide $12 billion for insurance companies' expenses in 2014, $8 billion in 2015 and $5 billion in 2016, which is scheduled to be the last year of the program.
The risk-corridor program will provide payments to insurance companies that paid claims last year that were more than 3 percent higher than what the company expected and require payments from companies with claims that were more than 3 percent lower than expected.
That program will also end after 2016. Payments due under that program based on last year's expenses will be calculated later this year, according to a Centers for Medicare and Medicaid Services news release.
SundayMonday on 07/12/2015