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US objects to state plan to settle health insurers’ dispute

Federal officials are objecting to a compromise plan intended to quell a dispute among the state’s health insurers.

State officials floated an idea this month to phase in over several years a new measure of the Affordable Care Act that requires some insurers to make payments to others, based on the health of their patients.

But the federal Centers for Medicare and Medicaid Services have “conveyed concern with any change,” said Jason Lefferts, spokesman for the Massachusetts Health Connector.

At issue are so-called risk adjustment payments, which, under the law, must be paid to insurers that take on the sickest members. The measure was intended to make sure health plans don’t just sign up healthy people for their coverage and pass the risks — and costs — of insuring sicker patients to others.


As a result, several smaller insurers could end up paying their largest competitor, Blue Cross Blue Shield of Massachusetts, as much as $104 million this year, according to state calculations. The Massachusetts Association of Health Plans, which represents 17 insurers, opposes the payments.

“It would have a destabilizing impact on the [health] plans and their ability to compete in the marketplace,” said Lora M. Pellegrini, chief executive of the insurers group.

Thomas D. Policelli, chief executive of the small insurer Minuteman Health, said the payments, over time, would force plans to raise premiums — especially for people who can least afford it. “It forces everybody to raise prices because now you’ve got to subsidize Blue Cross,” he said.

But Blue Cross officials maintain the payments are justified, as the insurer covers many sick patients who require expensive care.

“The risk adjustment program is an essential underpinning and requirement of the Affordable Care Act,” said Blue Cross spokesman Jay McQuaide. “It’s not discretionary. The state has a responsibility to implement this program.”


State officials proposed a compromise earlier this month that would have required smaller insurers to make only half of the payments — or $52 million — this year. The amount of payments, and which insurers receive them, can change every year depending on how the risks of covering the sickest patients are distributed among companies.

Under the state’s proposal, insurers would again have made 50 percent of the payments next year, 75 percent the following year, and 100 percent beginning in the fourth year, according to the insurers association.

But the Centers for Medicare and Medicaid Services have raised concerns about the proposal, Lefferts said. He said the Health Connector will continue to work with insurers to implement the program, and that “no final decisions have been made.”

Officials at the Centers for Medicare and Medicaid Services could not be reached for comment.

Priyanka Dayal McCluskey can be reached at priyanka.mccluskey@globe.com. Follow her on Twitter @priyanka_dayal.