11 Insurance companies that provide healthcare to individuals on Oregon’s Obamacare exchange will receive over $169 million in “risk adjustment” payments from the Centers for Medicare and Medicaid Services according to a report from the Portland Business Journal. Compounding this troubling news, the state’s insurance regulator approved steep premium increases last week, including a 25 percent premium hike for the state’s largest insurance provider.
The 11 companies will receive a total of $169,191,983, or $2,477 for each enrollee on Oregon’s exchange to help them meet the costs of providing healthcare to Obamacare enrollees in 2014. This high figure is in part due to Obamacare’s abysmal performance in Oregon – the state enrolled only 68,308 individuals just 29 percent of their target.
The risk adjustment program was established in order to encourage healthcare insurers to enroll high-risk individuals even if that meant posting a loss. In theory, risk insurance is supposed to be budget neutral because it redistributes funds from plans that made money to plans that did not. But in practice it is likely that there will not be enough plans making money to fund the many Obamacare plans that are posting losses.
This announcement comes days after Oregon’s insurance regulator ordered two insurance companies to raise premiums higher than they requested, and approved steep premium increase requests for other insurers of over 25 percent. According to Insurance Commissioner Laura Cali, premium increases were necessary to prevent “companies going out of business in the middle of the plan year, or being unable to pay claims.” Part of the reason for rate increases is because claims incurred in 2014 exceeded premium revenue by $127 million, according to state actuaries.
This news is the latest in a saga of bad headlines for Oregon’s Obamacare exchange. When Oregon began constructing its Obamacare exchange, officials hoped it would become a model for the rest of the nation. The exchange, known as “Cover Oregon” received $305,206,587 in federal grant money including almost $60 million in “early innovator” grants that would allow individuals “seamless access to information, financial assistance and easy health insurance enrollment.”
Despite receiving these millions in funding, Oregon’s exchange failed to enroll a single individual weeks after the website was supposed to launch. After months of turmoil, Cover Oregon announced it would shift its exchange to the federal system, costing taxpayers $41 million more. Reports by Maximus, the state’s quality assurance contractor identified numerous problems that plagued the construction of Cover Oregon in the months and years before launch. However, little corrective action was taken. Since then, investigations have been launched by watchdog groups and Congressional committees over accusations that decision-making was driven by the Governor Kitzhaber’s reelection campaign.
With millions in federal subsidies and higher premiums required for Obamacare to remain sustainable in Oregon, this mammoth law is clearly not working.