“The narrative is counter-intuitive and stands in contrast to some of the giant insurance companies’ complaints in recent months that the customers they’ve gained on the exchanges have been too sick and expensive,” Ladwig writes.
The situation with Baptist is the other side of that coin. The Patient Protection and Affordable Care Act has a “risk corridor” rule to subsidize insurance companies that have sicker, and thus more expensive, customers.
The money comes in part from companies with healthier, less expensive customers, Ladwig notes. Republicans in Congress have limited the Obama adminstration’s ability to fund the subsidies, which contributed to the bankruptcy of the Kentucky Health Cooperative and most of the other co-ops created under the health-reform law.
“The mechanism aims to prevent insurers from cherry-picking the healthier customers and leaving other insurers to incur the higher costs from the sicker patients,” Ladwig writes. But because small insurers such as Baptist have limited claims data, that can “make their customers look healthier than they are.”
“The federal risk assessment placed upon the organization under the Affordable Care Act is unsustainable by a corporation the size of Baptist Health Plan,” President James S. Fritz told state Insurance Commissioner Brian Maynard in a letter. He added
Jessica Kearney, the company’s regulatory director, told Ladwig that the smaller number of insurers on the Kentucky exchange contributed to Baptist’s decision to withdraw from Kynect. “Baptist leaders worried that they would gain even more customers — which might have required an even greater risk adjustment payment,” Ladwig reports. “So Baptist leaders decided to withdraw, rather than face an even greater loss on the individual exchange business.”
Ladwig writes, “Baptist declined to tell IL how much of a risk adjustment payment it had incurred. However, Baptist this year gained 7,500 customers on the exchange, far more than the 1,000 it expected, Kearney said. . . . Baptist Health Plan, based in Lexington, is part of the Louisville-based nonprofit health system Baptist Health.”