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Small health insurers decry ‘risk adjustment’ payments

The winners and losers have been announced in a federally mandated program that will redistribute $61 million among the state's health insurers.

The big winner, as expected, is Blue Cross Blue Shield of Massachusetts, the state's largest insurer, which stands to rake in $51.6 million in payments from smaller rivals.

Tufts Health Plan will receive about $8.4 million.

Ten other health plans will pay money — and some are crying foul.

The program, called "risk adjustment," is a provision of the Affordable Care Act that takes effect this year. Its purpose is to discourage insurers from designing plans that attract lower-cost, healthier people, while burdening their rivals with the sick.


Insurers are prohibited from rejecting people for health reasons. But they can design plans that lure the healthy and repel the sick. For example, plans with very narrow networks or limited drug coverage are less likely to be chosen by people who need a lot of care.

To account for such manipulation, the law requires a reckoning at the end of the year, taking money from plans filled with healthy people, and compensating those with a sicker population.

Blue Cross has said it accepts a high proportion of unhealthy people who use a lot medical services. In a statement Tuesday, Blue Cross said it had lowered premiums in anticipation of significant payments through the risk adjustment program. "More than a quarter of a million Massachusetts consumers have already seen the benefit of risk adjustment in their rates," the statement said.

But other insurers say the methodology is flawed and penalizes them for developing innovative, low-cost products. Lora M. Pellegrini, president of the Massachusetts Association of Health Plans, said during the recession, insurers were urged to offer plans with narrow networks and lower premiums. Now, those plans are the ones being penalized, she said.


Health New England, a small Western Massachusetts plan that has to pay $2.6 million, said in a statement that risk adjustment "will destabilize the health insurance market and distribute burdens unfairly and inappropriately."

Thomas D. Policelli, chief executive of Minuteman Health, a small health plan founded in 2013, said the $3 million his plan is being assessed amounts to 71 percent of the premiums collected in 2014. "A word like 'absurd' comes to mind," he said. Louis Gutierrez, executive director of the Massachusetts Health Connector, which administers the risk adjustment program in the state, noted the methodology was developed in 2012 and aired for public comment in 2013. No one raised objections until this year.

Felice J. Freyer can be reached at felice.freyer@globe.com. Follow her on Twitter @felicejfreyer.