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

Log on to Your Rise Account

Forgot your password?
Create an Account


Latest Posts

CMS Gives EDPS Transition Some Breathing Room

CMS published the final call letter for 2018 yesterday, April 3, which included a welcome accouncement regarding the transition from RAPS to EDPS-based RAF scores. Citing numerous public comments on the subject, CMS throttled back the speed with which they plan to switch over to an encounter-based methodology. Instead of the blended rates originally contemplated, they announced that the more modest blend of 85% RAPS to 15% EDPS would be used in 2018, allowing more time to improve the reliability of the encounter data methods. While the RISE data collaboration study was not cited, we believe that the educational value of our study, along with our communication and advocacy of a more moderate approach by CMS, contributed to the confidence with which plans and other interested parties spoke up during the open comment period. Once again, we owe thanks to the folks at Avalere and Inovalon, as well as at AHIP, for the collegial and professional collaboration. Also, we want to thank the health plans that actively participated in our study for making this work possible. ...
Read More

Take Aways from RISE Nashville Summit

The 11th Annual RISE Nashville Summit continued the event’s tradition of yearly growth. The return to downtown Nashville was widely applauded by attendees, who were glad to be back near Broadway’s nighttime funk and fun. While festive, this year's event occurred in the wake of the new administration in Washington, D.C., and the healthcare themes surrounding the "repeal and replace" of the Affordable Care Act (ACA) cast a long shadow. In contrast to the upbeat, confident notes struck by last year’s keynote speaker Senator Tom Daschle, this year’s sobering keynote address by Howard Fineman, NBC/MSNBC political analyst, The Huffington Post Media Group global editorial director, and bestselling author, was an assessment of the pluses and minuses of our new president. Mr. Fineman's remarks indicated that the political alliances in power will seek to undo what Senator Daschle viewed as "irreversible” a year ago....
Read More

Upcoming Conference


Qualipalooza: The 2nd Annual RISE Quality Leadership Summit 

This unique event incorporates three conferences presented side-by-side: the Star Ratings Strategic Planning Forum, the HEDIS Forum, and the CAHPS, HOS & Member Survey Forum. Register for one conference for an in-depth examination of a single area, or design your own event by opting for the all-access pass and choosing the sessions from each conference which correspond exactly to your interests.


Upcoming Webinar

The Impact of Quality Incentive Models in Medicaid Markets


Thirty-one of our fifty states now have Medicaid managed care, and several markets are expected to implement managed care in the next few years. More than $160B in Medicaid spending occurs through the Managed Care Organizations. As more and more states seek to do more with less, increasing accountability for health quality outcomes is placed on health plans. Join this webinar to learn the typical quality payment approaches states use, issues often faced by health plans under each model and what states are expected to do with payment models tied to quality performance in light of near term Medicaid reform efforts.


Connect With Us

Copyright © 2014 Resource Initiative & Society for Education. All rights reserved.