To examine variation in risk‐adjusted reinsurance payments across Part D plans, analyze its implications for the program, and explore options to reduce reinsurance payments.
2007–2015 Part D Plan Payment and Premium data; 2010–2013 Part D Prescription Drug Event data; and 2013 Part D Plan Formulary Files.
Risk‐adjusted reinsurance payments varied widely across plans at a given out‐of‐pocket (OOP) premium. The variance in risk‐adjusted reinsurance in common OOP premium ranges increased between 2010 and 2015. High risk‐adjusted reinsurance payments were negatively correlated with use of utilization management tools for high‐cost drugs.
Growing reinsurance payments shrink plans’ liability for managing drug spending for high‐cost enrollees, creating plan moral hazard, and making OOP premiums a noisy signal of plans’ total costs.