Protecting, maintaining and improving the health of all Minnesotans
Request for Information (RFI)
On State-based Risk Adjustment Feasibility Assessment
The Minnesota Department of Health is soliciting feedback from stakeholders on the study of statebased risk adjustment in Minnesota’s small group and individual health insurance markets consistent
with the provisions of the Affordable Care Act (ACA).
Background and Purpose of the RFI
In 2013, the Minnesota State Legislature directed the Minnesota Department of Health (MDH) to assess
the feasibility and potential costs and benefits of conducting state-based risk adjustment in Minnesota’s
small group and individual health insurance markets. MDH was directed to:
(1) Evaluate the extent to which Minnesota’s All-payer Claims Database (MN APCD) data could be used
for conducting state-based risk adjustment;
(2) Collect data needed for the study;
(3) Conduct modeling to determine if a Minnesota- based risk adjustment model can perform better and
be more cost-effective than the federal risk adjustment model; and
(4) Submit a report to the Legislature outlining the study recommendations by October 1, 2015.
MDH would like input from a wide range of stakeholders on key components and policy questions to
pursue with the study, including:

Potential opportunities of a Minnesota approach to be customized to Minnesota policy
goals;

Technical and operational considerations and concerns for design and implementation of a
state-based approach; and

Potential areas for improvement relative to the current federal risk adjustment
methodology.
The following resources provide more information on the details of the study of state-based risk
adjustment:


Minnesota legislation authorizing the study of state-based risk adjustment, Laws of Minnesota
2013, Chapter 108, Article 1, Section 65
https://www.revisor.mn.gov/laws/?id=108&year=2013&type=0
Minnesota State-based Risk Adjustment project page
http://www.health.state.mn.us/divs/hpsc/hep/riskadjustment/index.html
Division of Health Policy • Health Economics Program • PO Box 64882 • St. Paul, MN 55164-0882 • 651-201-3550
General Information: 651-201-5000 • Toll-free: 888-345-0823
http://www.health.state.mn.us
An equal opportunity employer
MDH, Request for Information
April 14, 2015
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Who Should Respond?
Anyone with an interest in providing information that may be useful to inform the study of state-based
risk adjustment may respond to this RFI. Potential respondents include, but are not limited to:
 Patient advocates and consumer representatives;
 Health insurance carriers;
 Health care providers;
 Policymakers;
 Employers and consumer groups, and others
Responders are not expected or required to respond to every question and may comment on only those
areas which are of interest or importance to them.
Instructions for Responding
Responses to this RFI are due by Tuesday, May 5, 2015 at 4:30 pm. Please submit responses
electronically to Anne Krohmer, Project Coordinator, at [email protected].
All responses to the RFI will be made available to the public.
RFI Questions
In considering the questions and discussion areas outlined below, it may be helpful to consider
your most recent experience with risk adjustment programs, whether ACA risk adjustment for
commercial individual and small group, Medicaid managed care, Medicare Advantage, or in conjunction
with other programs.
Basic Principles & Considerations
In addition to seeking feedback on the health policy issues highlighted below, we are seeking input on
the basic principles and considerations that should help inform the study regarding the feasibility and
potential costs and benefits of conducting state-based risk adjustment. As indicated, we also welcome
feedback on issues not explicitly addressed in the RFI.
Basic considerations we expect to integrate into the study and seek feedback on include:

Identification of the types of benefits that would make state-based risk adjustment worthwhile
relative to the status quo of federal operation of risk adjustment under the federal risk adjustment
methodology. In considering this question, we seek input on both the types of benefits that should
be considered, along with factors that would weigh in favor of retaining the status quo.

Benefits might include operating the system at lower overall cost (taking into account risk
adjustment user fees associated with federal operation) and a methodology and operation of the
program that is tailored and more responsive to the State’s needs as discussed further below and
that provides for greater control and predictability over time (relative to a methodology over which
the State has no control).

Factors weighing against state-based risk adjustment might include the potential value of using a
methodology and relying on operations used in multiple states (either for reasons of redundancy or
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April 14, 2015
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validation), and the resources – technical and human capital-wise – that might be required for statebased risk adjustment both for start-up and over time. Opportunity costs associated with the effort
might also be considered in relation to other potential priorities.
Policy & Programmatic Considerations
Broad areas to consider in relation to the potential for a Minnesota-focused risk adjustment
methodology for individual and small group ACA compliant coverage include:

Transparency in methodology or in program design and operations

Whether risk adjustment is appropriately correcting for possible adverse selection issues in
accordance with risk adjustment and market reform goals

Whether there is opportunity for “gaming” or other unintended consequences that should
be addressed

Administrative simplicity/complexity and cost
1. Addressing concerns related to adverse selection and ensuring incentives promote access to
coverage: Please consider whether a state-focused risk adjustment methodology that takes into
account local market factors and addresses related potential dynamics for adverse selection could
help to remove potential barriers and promote coverage opportunities, particularly for the disabled
and those with complex health conditions and needs.
2. Potential areas of study for a Minnesota-focused approach: Please describe from your perspective
the overall merits of designing a Minnesota-focused approach for risk adjustment. In doing so,
please also indicate which of the illustrative policy-related areas discussed below, if any, you believe
it would be important for a Minnesota-focused approach to address, and suggest other areas for
consideration. In highlighting these areas we do not intend to imply that any or all of them would
necessarily be pursued. Rather, we are seeking input on whether these or other considerations
should help to inform model development for study purposes. Potential areas to consider include:
a. Calibrating the risk adjustment methodology to Minnesota market experience to account for
state-specific characteristics related to care costs, network design, auto renewal, and
interaction across different public programs.
b. The interaction of risk adjustment with the state’s Basic Health Program (BHP) or other
Minnesota Health Care Programs. For instance, how risk adjustment might impact federal
funding for the BHP under the BHP funding methodology.
c. Anticipating the possibility of a permanent reinsurance program in light of the phase out of
the ACA’s transitional reinsurance program, and considering whether risk adjustment and
such a permanent program (should one be put in place) be coordinated.
d. Considering areas for administrative simplification and other benefits by enhancing the
alignment of risk adjustment programs across public programs, and taking into account
payment reform/value based contracting considerations.
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April 14, 2015
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e. Whether the alignment of risk adjustment and efforts to improve care management and
deliver better care can be further improved. This might include consideration of the
incentives for good care management related to the structure of hierarchical condition
categories (HCCs) or other potential code hierarchies, and continued and accelerated focus
on tying reimbursement to population health and outcomes.
3. Technical & operational considerations: Please address whether the analysis of the potential for a
Minnesota-focused risk adjustment should take into account technical and operational
considerations such as those outlined below.
In considering this question please keep in mind that there are two considerations at issue: 1)
design of a Minnesota-focused risk adjustment methodology; and 2) State operation of the risk
adjustment program (which would likely be required were there a Minnesota-focused
methodology).
a. Approaches to risk adjustment data collection, such as through the MN APCD, which may be
administratively simpler, better standardized, and more cost-effective than the status quo.
b. Risk Adjustment Data Validation (RADV) – potential for alternative or more streamlined
approaches that may be cost-effective and statistically valid for the market.
c. Methods for increasing the predictability of yearly risk-adjustment transfers to improve
accuracy in “budgeting” amounts in relation to premium development.
d. Approaches for taking into account geographical differences in cost or calculating the
premium basis for translating risk adjustment scores into dollar-based transfer amounts.
e. Enhanced technical support services such as the following:

Conducting statewide risk score simulations at interim points in the benefit year.

Greater opportunities for interaction in considering and resolving risk adjustment
data quality issues at interim periods during the benefit year.

Mechanisms to ensure a smooth glide path to the use of ICD-10 codes in relation to
risk adjustment.
4. Other topics for consideration: Please provide input on any other areas not otherwise addressed
that should be taken into account as part of the study and assessment of the feasibility and
potential costs and benefits of conducting state-based risk adjustment.