Department of Health & Human Services | Courtesy of Sarah Stierch

Shares of Humana took a hit Monday after The Wall Street Journal reported that insurers, including Humana, were gaming the Medicare system to boost federal bonus payments by hundreds of millions of dollars.

Shares of Humana fell 1.6 percent Monday, more than twice as much as the Dow Jones industrial average. Rival insurer Cigna fell 3.5 percent. UnitedHealth Group was down 1.2 percent.

A health care expert told Insider that Humana and other insurers are misleading millions of elderly consumers and are undermining the integrity of a federal government health insurance rating system that determines whether the insurers get annual bonus payments. Humana said its moves were approved by the Centers for Medicare & Medicaid Services and that they benefited customers.

Medicare is the government’s program for older Americans, but the insurance can be administered by private insurers. The federal government rates the quality of private Medicare plans on a five-star scale, which was set up as part of the Affordable Care Act. When customers are in higher-rated plans, which indicate better benefits, the insurer gets a bonus.

In recent years, when CMS downgraded a plan, insurers have responded by moving millions of customers out of those plans into ones with higher ratings, which meant the insurers would continue to get bonus payments for those millions of customers.

The extent of the practice, euphemistically called “crosswalking,” was revealed Sunday by The Wall Street Journal.

The star ratings affect a critical part of the insurers’ revenue stream: When Humana announced in October 2016 that the number of customers in plans rated four stars or higher was going to drop 45 percent, the insurer’s shares fell 5 percent. About eight months later, when Humana reported rising profits, in part because a greater share of customers were in higher-rated plans, shares rose 4.5 percent.

The WSJ said Sunday that Humana “crosswalked” nearly two million customers between 2012 and 2018, more than any other insurer, and that the practice for Humana “is estimated to be worth nearly $600 million in revenue this year, according to JPMorgan Chase & Co. analysts.”

Humana told Insider via email that all of its actions “were reviewed and approved by CMS in accordance with applicable rules and regulations.”

CMS told Insider via email  that it worries “that this practice may distort competition by masking low-quality plans under higher-rated surviving contracts and does not provide beneficiaries with accurate and reliable information for enrollment decisions.”

The agency said that it has proposed curbing “crosswalking” by changing the way that star ratings are calculated.

Humana said that it moves customers from lower-rated to higher-rated plans “to avoid significant reductions in benefits, increases in premiums, and disruptions in healthcare coverage for our members, and for investments in our network of value-based providers.”

But health care experts told Insider that by moving customers from low-rated, no-bonus plans to highly rated plans for which they get a bonus per customer, insurers were undermining the intent of the star rating bonus program. CMS uses the rating system to assess health plans on whether they provide care at the right time and in the right way to assure best results.

Gretchen Jacobson

“The intent of the program was to reward highly rated plans,” said Gretchen Jacobson, associate director of Kaiser Family Foundation’s Program on Medicare Policy.

“The ratings that someone sees for a crosswalked plan may not (reflect the) experiences of the enrollees in the plan,” she said.

Paul Ginsburg, a member of the federal watchdog Medicare Payment Advisory Commission, agreed.

Ginsburg, a professor at the University of Southern California, told Insider via email that so-called crosswalking “misrepresents a health care plan’s performance.”

Paul Ginsburg

He said the practice “not only takes money from taxpayers that is not deserved but seriously undermines the integrity of the star rating system.”

“Beneficiaries are being seriously misled,” Ginsburg said.

Humana did not respond to a follow-up email regarding comments by Ginsburg and Jacobson.

Ginsburg said MedPAC’s previous criticism of “crosswalking” has helped push the U.S. Congress to consider legislation to curb the practice. U.S. Sens. Mitch McConnell, R-Ky, and Rand Paul, R-Ky, and U.S. Rep. John Yarmuth, D-Ky., could not be reached Monday. McConnell and Sen. Chuck Schumer, D-NY, offered the amendment in the Feb. 9 Bipartisan Budget Act to reduce the practice.

Jacobson said the new rules, which will take effect in 2020, will base star ratings on the weighted average of the plans that are being combined. That means that if insurers move a large number of consumers from a poorly rated plan into a highly rated plan with few consumers, the ratings of the smaller plan will be reduced by a significant amount.

Boris Ladwig is a reporter with more than 20 years of experience and has won awards from multiple journalism organizations in Indiana and Kentucky for feature series, news, First Amendment/community affairs, nondeadline news, criminal justice, business and investigative reporting. As part of The (Columbus, Indiana) Republic’s staff, he also won the Kent Cooper award, the top honor given by the Associated Press Managing Editors for the best overall news writing in the state. A graduate of Indiana State University, he is a soccer aficionado (Borussia Dortmund and 1. FC Köln), singer and travel enthusiast who has visited countries on five continents. He speaks fluent German, rudimentary French and bits of Spanish, Italian, Khmer and Mandarin.


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