Colorado Division of Insurance
Risk Adjustment Question
Who should administer Risk Adjustment in Colorado?
• Federal Government; or
• State Government:
• Use Federal Model (2012 Exchange Bill says to
“strongly consider”)
• Develop state-specific model
•
State-specific model must be approved by
HHS
Risk Adjustment – what is it?
 Permanent program to be implemented in 2014,
designed to align premium payments to risk across all
plans in the pool
 Meant to protect non-grandfathered individual and
small group plans, inside and outside the Exchange
against adverse selection
 Pays health insurance carriers that disproportionately
attract high-risk participants (risk factors of
individuals across plans)
 Transfers funds from lower risk plans to higher risk
plans
Risk Adjustment – who operates it?
 State option to operate if the State establishes an
Exchange
 HHS will operate on behalf of a non-electing State
Risk Adjustment Considerations
 Risk adjustment models, are complicated and very
data intensive
 Final details of the federal model for risk adjustment
methodology will not be released until October 2012.
 State deadline for proposal of an alternative risk
adjustment, using the risk adjustment methodology is
November 2012.
Risk Adjustment Considerations
 No Colorado legislation authorizing a risk adjustment
mechanism in Colorado
 State can take control of risk adjustment at a future
date
Overview of Wakely Work
 Robert Wood Johnson foundation hired Wakely
Consulting to look at various aspects of the health care
reform, one being risk adjustment
 Wakely analyzed the final rules and made
recommendations for policymakers and state officials
on risk adjustment
Wakely Analysis of Risk Adjustment
 A critical issue for policymakers is the aggressive
timeline required for implementation of these
programs; a substantial amount of analysis and
interaction with key stakeholders needs to be
performed in a short period of time.
 In addition, even with good data, states, health
insurance carriers, providers and members will face
uncertainty.
Wakely Analysis of Risk Adjustment
 Risk adjustment results must be completed by June
30th in the year following the benefit year. Therefore,
the federal Minimum Loss Ratio deadline will likely
need to be adjusted (timing issues are acknowledged
in the preamble of the final rules).
Wakely Recommendation
• Federal administration of risk adjustment
program, at least until completion of state
mandated study due December 1, 2015
DOI next steps
 Currently, is analyzing what would be best for the State
of Colorado
Questions