Minuteman Health hit with $16.7 million ACA adjustment

Insurer blames ‘highly volatile’ risk formula for pending individual plan rate hike

Minuteman Health, the Massachusetts-based nonprofit insurance company that also serves the New Hampshire market, will have to pay a risk adjustment bill of $16.7 million, which will sharply drive up its individual insurance rates for next year.

But the total payout is almost $1 million less than Minuteman had set aside, which means that rates may not increases quite as much as expected. Indeed, it will mean a $1 million increase in the company’s quarterly results.

“The company’s financial condition is strong, its membership is up more than 85 percent over 2015, and it is showing a year-to-date profit. But the risk adjustment program has proven to be highly volatile,” Minuteman said in a press release.

Under the Affordable Care Act, a risk adjustment formula is used to figure out how much insurers with healthier populations should pay to aid insurers with populations with more health care needs.

Minuteman contends that the formula penalizes new and rapidly growing insurers that are not yet able to document the risk of new enrollees. So it is joining with other Consumer Oriented and Operated Plans, or CO-OPs, to push the federal government to change the formula.

Minuteman has expanded rapidly, nearly doubling its membership last year.

Minuteman blamed the risk adjustment for a projected 45 percent increase in its individual market rates in 2017. The company’s group rate was largely unaffected.

Minuteman said the risk adjustment accounts for about 40 percent of the premium increase. Since the assessment is slightly less than expected, the rates might not go up quite as high.

Meanwhile, Minuteman said it is making some headway with federal regulators who have agreed to adjust the risk adjustment formula over the next five years – a period that is “far too slow,” said the company.