Risk Adjustment on the Health Insurance Exchanges


October 26, 2015

In early 2014, DHHS introduced the concepts of Risk Adjustment for the Health Insurance Exchanges (HIX).  Despite the intervening months, there remain a large amount of confusion and some lingering questions regarding the details of this program.

Risk adjustment exists in the HIX sphere (also known as Commercial or HHS Risk Adjustment) for the same purposes that it was instituted into Medicare Advantage: to protect against adverse selection and mitigate the financial impact of healthy versus unhealthy members.  Without the incentive of risk adjustment, health plans have traditionally selected for healthier members, who cost them less.  Risk adjustment revenue levels this playing field: sicker members now represent greater investment but also greater reimbursement opportunity for the health plan.

States operating their own Health Insurance Exchanges (not utilizing the federal exchange) are eligible to establish their own state-based risk adjustment programs should they wish.  These programs must follow federal guidelines, including that an entity other than the exchange itself must perform the risk adjustment function.  At this time, only Massachusetts operates its own risk adjustment program; all other states, whether operating their own exchange or utilizing the federal, engage in HHS’s risk adjustment program.

For those organizations familiar with Medicare Advantage Risk Adjustment, there are some changes for the HIX program.  The HHS-HCC model governs the (federal) risk adjustment sphere; it identifies 3,518 ICD-9-CM codes across 127 HCCs.  (A draft ICD-10-CM model is available, mapping 7,768 diagnosis to those same categories.)  Some of the HCC’s are numbered to match the CMS-HCC (Medicare Advantage “Part C”) model, but most are not and an organization should not depend upon this factor.  Unlike Medicare Advantage, all diagnoses submitted for HIX risk adjustment must be tied to a claim received and processed (though not necessarily paid) by the health plan.

Unlike the multiple “sweeps” periods for Medicare Advantage, Commercial Risk Adjustment has just one submission due date, April 30 of the year following the year of service.  (Example: 2015 dates of service due by April 30, 2016.)  Whereas the majority of Medicare Advantage enrollees (about 60%) have at least one risk adjusting diagnosis documented, it is expected that only about 20% of consumers in the commercial market will have relevant conditions.

The Commercial Risk Adjustment program for HIX transfers funds from lower risk plans (those with healthier members) to higher risk plans (those with less healthy members) in a “zero-sum game.”  Health plans are competing for a limited pot of funds, unlike the theoretically unlimited reimbursement available under Medicare Advantage Risk Adjustment.  High and low risk for these HIX plans will be determined by HCC scores, based upon reported diagnoses, and verified through yearly audits.

For more information on the Health Insurance Exchanges, visit CMS at:https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Marketplaces/index.html



Categories: Risk Adjustment, HIX
Tags: risk adjustment, HIX, health insurance exchanges, ACA

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