SAN FRANCISCO — The CEO of Molina Healthcare says an Obamacare program prompted his company to raise marketplace premiums for 2017 instead of lowering them.
J. Mario Molina said his company might have cut 2017 premiums in the nine states where it sells Obamacare plans, instead of raising prices 16 percent on average. But under a risk adjustment program laid out by the healthcare law, the company was required to pay a large sum to other insurers who fared poorly in the marketplaces.
Without those payments, the company would have made $75 million in profits pre-tax, Molina told the Washington Examiner in an interview at the JPMorgan Healthcare Investor Conference.
“We’d take a break-even operation to one that’s profitable,” Molina said. “Not wildly profitable, but profitable.”
Under the Affordable Care Act’s risk adjustment program, marketplace insurers with healthier, lower-cost patients must submit payments that are then given to companies with sicker, higher-cost patients. Lawmakers added the program to the Affordable Care Act with the aim of stabilizing premiums by spreading out risk.
At the request of Molina and some other insurers, the Centers for Medicare and Medicaid Services has modified how the payments are calculated for next year, to ensure they’re based more directly on medical claims.
But to companies like Molina that are on the giving end, the program still doesn’t incentivize insurers to set lower premiums since they’ll be compensated for losses anyway. Molina wants the program erased.
“Because of this strange situation we face, we had to raise our premiums and that is what I believe is a big part of what’s pushing up these premium rates,” Molina said. “It’s this artificial risk transfer thing.”
It’s unlikely Republicans could ditch the risk adjustment program in a bill they’re working on to repeal big parts of the law. Because they’re using the budget reconciliation process requiring just a simple Senate majority to pass, all the provisions must directly affect federal spending.
