MLR and Risk Adjustment games (a cynical take)

I was talking with another health insurance nerd last night.  We talked about the risk adjustment pause and a very cynical thought was developed — what if the Center for Medicare and Medicaid Services (CMS) instructs insurers to exclude risk adjustment flows from their Medical Loss Ratio (MLR) calculations that are due on July 31?

MLR requires individual market insurers to spend 80% of their net premium dollars (minus taxes and fees) on claims or qualified quality improvement activities.  Net premiums are after risk adjustment flows.  So insurers that pay out risk adjustment will see their net premiums be lower than their gross premiums.  Insurers that collect risk adjustment transfers will have their net premiums be higher than their gross premiums.

Some of the low morbidity insurers (Centene, Oscar etc) have very significant risk adjustment liabilities as part of their business strategy.  Some of these insurers like Centene pay very little in claims so their raw MLR is low.  It is only with the significant net RA payment that their MLR ratios are near to 80%.

However, if there is no risk adjustment payments, some of the insurers in a net payable position will have to cut some very large MLR rebate checks that will arrive just a few weeks before the election.

This builds on a CSR-MLR thought that I had last fall:

The rebates are sent in the following September after the end of the policy year.

And then in the fall of 2020, ambitious state insurance commissioners will be handing out rebate checks in late September as they are running for Governor or the Senate. Or if they are a bit less ambitious, they are supporting the incumbent party by handing out checks and injecting new federal money into the state and making the fundamental background economic picture a bit better than it otherwise would have been.

I might be getting too cynical today.

The outcome would be a significant front page splash of big federal checks going to people who bought policies from low MLR insurers just before the election.  This may be a cynical take but it is a plausible pathway.

10 replies
  1. 1
    trnc says:

    Always bet on black (hearted, that is). I don’t think you can be too cynical about republican plans to cheat.

  2. 2
    MomSense says:

    In the latest news from Maine’s Medicaid saga, LePage says he’d rather go to jail than expand Medicaid.

  3. 3
    MomSense says:

    The cynical take is the always the best take with these sociopaths.

  4. 4
    Anya says:

    oh god. Trump is such an embarrassment and Theresa May is a dead PM walking. I guess no Love Actually moment.

  5. 5
    Roger Moore says:


    In the latest news from Maine’s Medicaid saga, LePage says he’d rather go to jail than expand Medicaid.

    That seems like a perfectly acceptable outcome.

  6. 6
    Amir Khalid says:

    Can the judge he is defying jail him for contempt?

  7. 7
    MomSense says:

    @Roger Moore: @Amir Khalid:

    I don’t know what will happen. We have good people on the case. I’m focusing on our gubernatorial race since our Dem candidate is a boss and her sister is the former public health director for the state who expanded Medicaid before the ACA caught up. One of the most frustrating aspects of this mess is that we expanded Medicaid long before ACA expansion. LePage and the GOP legislature cut Medicaid eligibility and rolled it out like it was due to ObamaCare.

    When LePage campaigned for Governor the first time, he used to tell a story about how he had employees at Mardens (a local chain that sells cheap stuff) that deserved pay raises but that he couldn’t because they would lose their Medicaid. I think we can all spot the multiple ways in which this is an infuriating story.

    He later slashed Medicaid and opposed raising the Minimum Wage.

  8. 8
    Kay says:

    OMG, a Trump complaining about being made to feel “unwelcome”

    They’re the nastiest, most mean-spirited and ungenerous people on the planet but they expect roses thrown at their feet everywhere they go.

    What IS that? Who raises people like this, people who never, ever think of others?

    Me, me, me. My feelings. No one else exists.

  9. 9
    Kristine says:

    Isn’t it possible that recipients of said checks may think ACA = more money for me and therefore take exception to any GOP candidates who want to take it away?

  10. 10
    Amir Khalid says:

    At this point I don’t think anyone in Britain is really happy to see Trump there, including Theresa May. Since he arrived, he’s done nothing but try her patience.

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