June 24, 2015

Louis Gutierrez, Executive Director

Commonwealth Health Insurance Connector Authority
100 City Hall Plaza, 6th Floor
Boston, MA 02108
Re: Risk Adjustment
Dear Executive Director Gutierrez:
As the Chief Executive Officers of three health plans participating in the Massachusetts merged health insurance
marketplace, we are writing you concerning our position that Massachusetts risk adjustment program harms
consumers. Implementation of the program has already led to an increase in small carrier premiums, and failed to
significantly reduce large carrier premiums. We previously expressed our concerns to you through letters and
during Connector hearings.
As part of our analysis of the Connectors risk adjustment program we engaged Wakely Consulting Group to
conduct an independent analysis of the Connectors risk adjustment program. Wakely is a nationally-regarded
actuarial consulting group with broad experience in analysis of the Patient Protection and Affordable Care Act.
Attached you will find a summary of Wakelys report. The report provides independent analysis confirming our
previous claims: Massachusetts risk adjustment program attempts to cure a problem which does not exist,
unfairly penalizes smaller regional carriers while benefiting larger carriers and will de-stabilize, rather than
stabilize, the merged marketplace.
Before you send out the Final Risk Adjustment Payments and Charges Reports, we urge you to read the attached
summary. It is imperative that before the final reports are issued that the Connector is certain the calculations are
consistent not only with the Connector and federal regulations, but also with the underlying purposes of risk
adjustment.
The Final Risk Adjustment Payments and Charges Reports have the potential to dramatically impact the financial
positions of our companies and our ability to offer competitive and affordable choices to consumers. In fact,
consumers are already paying a price for defective risk adjustment program. Our publicly available premium
filings show that risk adjustment, as currently implemented, will significantly increase the cost of our premiums
for the third quarter of this year and beyond. As we see in recent news, the largest national carriers are exploring
mergers and consolidation, making it more important than ever to assure that smaller, newer and regional carriers
remain a strong and affordable alternative in the marketplace.
The Connector has an obligation to ensure that the risk adjustment program is implemented consistently with the
underlying purpose of the program, to promote competition and to enhance the stability of the market. We
respectfully request you consider all of the positions we have previously outlined to you and that are confirmed in
Wakelys independent analysis before moving forward with the Final Risk Adjustment Payments and Charges
Reports.
In order to encourage, in the short and long term, the stability of the insurance market, the growth of competition
and slower growth in premiums, we request that you consider the following remedies:
1. That the risk adjustment transfers be postponed for this year, and that any pause in
implementation be used:

a. To assure that data is correct and complete

b. To study the problems and issues identified in the Wakely analysis, since real world
consequences may not always align with methodological theory
c. To consider alternatives to the risk adjustment program (as presently designed) in order
to avoid or mitigate unintended consequences
2. A variety of approaches to address the unintended harms of risk adjustment are worth
consideration. For example:
a. Risk adjustment could be phased in based on the size of the carrier, so that smaller
carriers are exempt for a reasonable time
b. Risk adjustment could be phased in by applying an increasing percentage of the
adjustment over several years, as has been proposed for Massachusetts
c. To avoid permanent damage to smaller plans, risk adjustment could be phased out, as will
be true for Risk Corridors and Reinsurance, or limited in scope, as those programs are
3. Risk Adjustment could be adjusted in a variety of ways, such as:
a. Capping the risk adjustment payment (as a percent of premium or of revenues) so that it
does not unduly harm any carrier or affect financial stability, and does not impose too
great a penalty on consumers
b. Applying it on a fully regional basis, as is done with Medicare Advantage risk adjustment
c. Excluding smaller carriers entirely or limiting the effect upon them
d. Limiting the effect on narrow network plans, or on selected other plans with alternative
or innovative structures
e. Not applying risk adjustment to new carriers until they have been in the market for
several years or reached a significant enrollment
f. Using another standard for comparison, such as the issuing carriers average premiums,
rather than a market-wide premium, so that issuers arent penalized for creating low cost
options
Thank you for considering the attached summary and recommended remedies.
Sincerely,

Patrick Hughes
President and CEO
Fallon Health

CC:

Maura McCaffrey
President and CEO
Health New England

Tom Policelli
President and CEO
Minuteman Health

His Excellency Charles Baker, Governor, Commonwealth of Massachusetts

Hon. Elizabeth Warren, U.S. Senator
Hon. Edward Markey, U.S. Senator
Kristen Lepore, Secretary, Executive Office for Administration and Finance
Marylou Sudders, Secretary, Executive Office of Health and Human Services
Daniel Judson, Commissioner, Division of Insurance
Aaron Boros, Executive Director, Center for Health Information & Analysis
Kevin Counihan, Director & Marketplace Chief Executive Officer, Centers for Medicare &
Medicaid Services
Andrew Slavitt, Acting Administrator, Centers for Medicare & Medicaid Services
Massachusetts Congressional Delegation