Where To Now on the HIX Marketplace?

It appears that there is a popular backlash against the reforms that HHS wants to conduct in the HIX marketplace outlined in their proposed rules.  The following Modern Healthcare article suggests that the overriding issue that the public is concerned about is achieving some kind of stable path for premiums and the elimination of the big swings from one year to the next.  HHS, in contrast, is trying to impose some restrictions and uniformity like CMS did in the Medicare Advantage world:  regulations around what a provider network can look like, standardized benefit packages (not just actuarial values), and so on.  The payer community objects to such restrictions which, they claim, will cause further pricing disruptions to accommodate these new rules.   You always have to take these complaints as containing a kernel of truth but you never know how accurate their objections are in proportion to their financial priorities. 


 Instability of pricing is not going to be overcome in just two or three annual cycles:  it is going to require more time.  You can look back to 2005 when Part D was introduced to Medicare Advantage (Medicare + Choice then).   The first round of pricing is completely based off actuarial guesses using the closest proxy data from some other line of business.  By the time pricing has to be submitted for the second cycle, there is not enough claims data to really do good pricing either, so year 2 is just some carbon copy of year 1 plus some actuarial estimate of annual trend applied.  Year 3 begins to see some settling out with real data.

 The problem in the HIX world, however, in contrast with Medicare Advantage, is the whole zero-sum risk adjustment game underneath it.  For year three, there are several ways you can lose money, and I understand that 60% of the HIX plans did just that when you remove risk corridor payments.

  • Pricing was too low for the actual risk selection and you lose money on utilization and unit cost of care
  • Pricing is too low because the risk adjustment process did not adequately capture the ICD codes and other competing plans did a better job and sucked money away in the final settlement
  • Shock claims were more frequent and bigger than expected and the final government reserves for risk corridors were inadequate and recovered only 12.6 cents on the dollar
  • Pricing was adequate, risk selection was within reasonable limits, but the expenses involved in doing risk adjustment were matched by competitors and nothing was recovered in the risk adjustment settlement process, leaving the issuer upside down from administrative costs
  • In the future, risk corridors are going away, so that will no longer save 60% who lost money
  • 100% RADV audits will begin in 2016, introducing a whole new set of math exercises to price into the equation

With these added complexities, achieving some kind of equilibrium in premium pricing is going to take some time to wash these dynamic factors through.  In the meanwhile, the question is what tolerance there is in the marketplace for price fluctuations.  Certainly with larger premium subsidies for the low income folks, there is less sensitivity to price swings.  But those individuals bearing the brunt of these price changes may not want to hang in there while the market corrects itself.

There is some room for optimism, nevertheless.  While we saw a large spike in health care cost inflation due to people accessing health care using their new HIX plans, that utilization surge may even out in a couple years as people get established and under control.  We saw that with Medicare Advantage where the larger portion of the population got coverage initially and overused it, once they were stable, the future new enrollment waves were diluted by the larger population already taken into care.  

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

Log on to Your Rise Account

Forgot your password?
Create an Account

Association Sponsors

Latest Posts

It’s not Obamacare anymore. It’s our national health-care system.

By Drew Altman and Larry Levitt July 29 Drew Altman is president and chief executive of the Henry J. Kaiser Family Foundation. Larry Levitt is senior vice president of the Kaiser Foundation. Republicans failed to repeal and replace the Affordable Care Act early Friday because of divisions within their own ranks, and because they tried not only to repeal and replace the ACA but also to cut and cap the Medicaid program, generating opposition from many red-state governors and their senators. But most of all, they failed because they built their various plans on the false claim — busted by the Congressional Budget Office — that they could maintain the same coverage levels as the ACA and lower premiums and deductibles, while at the same time slashing about a trillion dollars from Medicaid and ACA subsidies and softening the ACA’s consumer protection regulations. Had they succeeded, they would have won a big short-term victory with their base, which strongly supports repeal, but suffered the consequences in subsequent elections as the same voters lost coverage or were hit with higher premiums and deductibles. ...
Read More

Where to Now? True North Again

By Kevin Mowll, Executive Director of the RISE Association The failure of the Republicans to repeal, replace, or wreck ObamaCare is a wakeup call for everyone, not just Republicans. While the RISE Association steers away from purely political commentary, the lesson of this protracted political mess needs to be called out for the sake of putting our priorities straight around public policy regarding healthcare reform. In the attached Wall Street Journal article, which suggests that bipartisan solutions are the only remaining way forward, the author proffers hope that the blistering truth will be obvious to all the participants in the 7-year-long fracas around repeal and replace. The bloodied players may still brood in frustration that their political wills were not enough to win, but the author wonders if cooler heads will prevail. I, for one, am not so sanguine; yet I can only hope. https://www.wsj.com/articles/republicans-search-for-answers-can-they-find-any-across-the-aisle-1501259286 The lesson I take away from the many years of wrangling is that the ObamaCare political football games demonstrates that political wills are not the way forward. They lose sight of the True North issue at hand. Rather, the failures of both political parties in arriving at a bipartisan solution signals the fact that what is good for America is good healthcare policy, not political prowess over rivals. Governing from the fringe is not sustainable in a democracy. ...
Read More

Upcoming Conference


RISE West 2017 

Featuring three pre-conference workshops, and five tracks covering 20+ in-depth session topics, this event is an extraordinary value-proposition you don’t want to miss. Hear from industry thought leaders, as well as health plan and provider group experts who will share practical insights and updated lessons learned from the trenches on critical topics in risk adjustment, quality improvement, data management, coding compliance & more!


Upcoming Webinar

The Encounter Management Best Practices Playbook

What encounter best practices can managed care plans put into place to help them manage the pace of change in formats, rules and regulations? What do managed care plans have to stop doing if they want to ensure business continuity with their encounter operations in the face of change and bleeding revenue? What can you do to make sure your plan isn’t one of the ones that figured these things out too late? Join us to get answers to these questions and more on September 12th.


Connect With Us

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