Study on State-based Risk
Adjustment in the Individual &
Small Group Market
Project Update Meeting
September 22, 2015
9/22/2015
1
Meeting Agenda
• Introductions
• Background on risk adjustment and legislative study
• Project update and next steps
• Federal risk adjustment model results
• Feedback from MN health plans
• Risk adjustment modeling plans
• Questions
• Closing
9/22/2015
2
BACKGROUND AND UPDATE
State-based Risk Adjustment Feasibility Assessment
9/22/2015
3
Risk Adjustment Background
• ACA provides a permanent risk adjustment (RA) program
in each state
• Applies to all individual and small group plans on and off Exchange
• Excludes grandfathered plans, student health plans, and some
plans not subject to ACA market reforms
• RA is a budget neutral mechanism used to transfer funds
between plans with relatively lower risk enrollees and
plans with relatively higher risk enrollees, to protect
against adverse selection
• States that operate an Exchange have the option to also
operate their own RA program
• HHS administers RA in states that do not administer their
own program
9/22/2015
4
Study Background
• Legislative direction: assess the feasibility and potential
costs and benefits of the option to conduct state-based
risk adjustment.
• Evaluate the extent to which Minnesota’s All-Payer Claims
Database (MN APCD) data could be used for conducting
state-based risk adjustment;
• Collect additional data needed for the study;
• Conduct analysis to determine if a Minnesota- based risk
adjustment model can perform better and be more costeffective than the federal risk adjustment model; and
• Submit a report to the Legislature outlining the study
recommendations by October 1, 2015
9/22/2015
5
Update on Study Activities
• Vendor
• Engaged Milliman as MDH’s technical vendor
• Data Analysis
• Conducted preliminary MN APCD data quality analysis
• Completed collection of supplemental enrollment data
• Stakeholder Engagement
• Conducted public stakeholder meeting and health plan
interviews
• Released Request for Information
• Conducted interviews with MN health plans following release
of federal model results
9/22/2015
6
Timeline and Next Steps
• 2015
• September
• Produce carrier-specific data quality assessments of MN APCD
data
• Evaluate MN APCD supplemental enrollment data
• October
• Finalize MN APCD Evaluation findings and recommendations
• Conduct actuarial and risk adjustment modeling
• Develop and test four risk adjustment models, including the HHS model
9/22/2015
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Timeline and Next Steps (cont.)
• November
• Create draft of final report and recommendations
• Summarize all findings and formalize recommendations
• Seek feedback from health plans
• December
• Finalize report and recommendations
• Submit final report to Legislature
• Ongoing Activities
• Communication with stakeholders, project workgroup and MDH
leadership
9/22/2015
FEDERAL RISK ADJUSTMENT
PROGRAM
Minnesota results and feedback
8
9/22/2015
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Federal Risk Adjustment program results
• Reinsurance and risk adjustment calculations were
•
•
•
•
completed on time by 6/30
“99.7% issuers who set up EDGE servers successfully
submitted the data”1
CMS finds the program “is working as intended” 1
Nationwide, 10% and 6% premiums transferred in the
individual market and small group market respectively
Risk Adjustment Data Validation will not be done for 2014
due to technical difficulties. CMS will still conduct RADV in
2016 for the 2015 benefit year
1Source: https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-
Programs/Downloads/RI-RA-Report-Draft-6-30-15.pdf
9/22/2015
10
2014 MN reinsurance and risk adjustment
settlement results
Issuer
BCBSM, INC.
Federated Mutual Insurance
Company
Group Health Plan, Inc.
Gundersen Health Plan
Minnesota, Inc.
HealthPartners Insurance
Company
HealthPartners, Inc.
John Alden Life Insurance
Company
Medica Health Plans of
Wisconsin
Medica Insurance Company
PreferredOne Community
Health Plan
PreferredOne Insurance
Company
Sanford Health Plan of
Minnesota
Time Insurance Company
UCare Minnesota
Reinsurance Payment
$109,644,844
Not Eligible
IND Risk Adjustment
$7,616,924
$0
SG Risk Adjustment
$11,759,377
($2,090,475)
$2,695,283
$74,310
($2,651)
$32,683
$0
($97,648)
$10,273,154
($5,217,351)
($820,792)
$1,402,533
$2,784
$2,384,614
($46,632)
($4,200,534)
$113,762
$2,670,519
$130,711
$0
$8,295,441
Not Eligible
($11,637,873)
$0
($4,213,354)
$637,606
$51,337,472
$5,422,835
($1,029,344)
Not Eligible
$0
($20,085)
$3,434,347
$311,887
$388,994
$927,745
($38,513)
$0
9/22/2015
11
Reactions from the Industry
• Citi Research,10/2014 survey of carriers representing
80% of the individual market showing carriers making
more realistic risk adjustment estimates
• T. Jost Health Affairs 7/1/15 blog “…incredibly
complex…to have come off without serious technical
problems”
• Anecdotally, we also heard
• Some carriers have filed for reconsideration
• Some carriers were surprised at the magnitude of the transfers
• Some carriers argue that the methodology is disadvantaging new
entrants to the market
9/22/2015
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Reactions from MN carriers
• Operations
• Several carriers were satisfied overall with the operation of the federal
risk adjustment program
• Appreciate the transparency, ability to validate data submission
• Understand that CMS intends to refine the process
• Confident because their data appears to be clean and no discrepancies to
report
• Carriers found reports from the EDGE server to be helpful and
transparent
• One carrier was able to reconcile EDGE server calculations
• No carrier indicated they submitted any reconsideration requests.
9/22/2015
13
Reactions from MN carriers
• Interim data simulations
• Reactions to interim data simulations results were mixed
• One carrier found interim simulation results to be helpful
• One carrier mentioned future simulations would not be as helpful due
to stabilization of the market
• Methodology
• Plans hadn’t examined how well the methodology predicted costs for
subpopulations
• Data Quality
• One carrier acknowledged that differing data quality could lead to
differing results
9/22/2015
14
Reactions from MN carriers
• Delay of RADV
• No carriers had engaged auditors for the RADV program
• One carrier indicated they were not concerned with the delay and were
glad that carriers would have at least one year on the program to test it.
• General Comments
• Generally, carriers think rates in the market will become more stable
over time
• For the individual market, in part due to MCHA members already being
incorporated into the pool and underrating in first year.
• Carriers expect the federal program to become more stable and
consistent over time; minor problems characterized as “first year kinks”
9/22/2015
15
STATE BASED RISK
ADJUSTMENT MODELING
Approach and study design
9/22/2015
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Approach to state-based risk adjustment
modeling
• The Project Team is working on the different modeling
options and considerations, and is seeking input from
stakeholders
• Preliminary study design:
• Evaluation of the HHS HCC model (“Baseline”)
• How well it is predicting for Minnesota and for subgroups of policy
interest, e.g., purchased on/off the exchange, members near elderly,
with disabilities, special socioeconomic status
• Recalibrated model, based on the federal HCC classification
• Alternatives to the use of the state average premium for settlement
• Predictability of large claims and relationship to reinsurance
• Adjusting prediction biases relating to partial-year enrollment
• Implication of risk adjustment for the Basic Health Plan program
(continue on to next slide)
9/22/2015
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Approach to state-based risk adjustment
modeling (cont.)
• Qualitative assessments of:
• Provider network design and innovation and potential impact on ACA
•
•
•
•
•
•
•
risk adjustment
Special pooling and market migration considerations
Consideration of differences in coding density in risk adjustment
geographic
Alignment of ACA risk adjustment with risk adjustment used in
alternative payment models
Leveraging prescription drugs in risk adjustment
Non-traditional factors in risk adjustment
Prospective risk adjustment
Alternative to HCC systems
9/22/2015
Questions?
• Please submit questions directly
to the presenter by clicking on
the chat button in the top of the
webex
• Under the “Send to” drop-down
menu, please select the
presenter
18
9/22/2015
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Comments on the study
• MDH will be accepting written comments on the state-
based risk adjustment modeling approach for the next 30
days, until Thursday, October 22, 2015
• Please send comments by email to Anne Krohmer,
Project Coordinator, at [email protected]
9/22/2015
20
Contact & Additional Resources
• Health Economics Program Home Page
• www.health.state.mn.us/divs/hpsc/hep/index.html
• Risk Adjustment Study
• http://www.health.state.mn.us/divs/hpsc/hep/riskadjustment/index.html
• Contact:
• Anne Krohmer, [email protected], 651-201-3764
• Stefan Gildemeister, [email protected], 651-201-3554