New York Issues Emergency Regulation to Help Health Insurers Deal with Adverse Impact of Federal risk Adjustment Program

(September 9, 2016)

The New York Department of Financial Services (NYDFS) issued an emergency regulation “to address factors that are not addressed in the federal risk adjustment program administered by the Centers for Medicare and Medicaid Services (CMS) in the small group health insurance market.” This emergency regulation was issued to address concerns raised by NYDFS in a June 28, 2016 letter. (Click here to read the letter.) In the risk adjustment program, a health insurer with mostly healthy insureds pays into a fund that helps offset the costs to insurers with less healthy insureds. However, NYDFS is concerned that the amount smaller insurers are forced to pay into the fund could have an adverse impact on their financial health as a company. Under the emergency regulation:

after CMS makes its 2017 risk adjustment program calculations, DFS will determine if the CMS calculations will have an adverse impact on New York’s small group health insurance marketplace. If there is an adverse impact, the Superintendent will implement a “market stabilization pool” taking into account certain factors relevant to the New York market. Utilizing these additional factors, insurers who received money from the risk adjustment program will pay an allocable percentage of that money into a fund administered by DFS. DFS will then transfer that money to those insurers who paid into the risk adjustment program and were adversely impacted. The amount of money paid into the pool will be based on DFS’s estimate of the amount of the imbalance, which shall not exceed 30% of the total amount that an insurer received from the risk adjustment program.

This only applies to insurers in the small group health insurance marketplace.