CMS proposal could improve risk adjustment model for health plans

On August 29, CMS released the proposed rule for the HHS Notice of Benefit and Payment

Parameters for 2018. The rule includes payment parameters and provisions related to:

• The risk-adjustment program;

• Cost-sharing; and

• User fees for health insurance exchanges.

CarpenterIt also includes guidance related to qualified health plans, network adequacy, and the medical loss ratio program.

Related: 4 ways to improve ACA risk-adjustment model

To help readers understand more about the rule and the biggest impacts, we asked Elizabeth Carpenter, senior vice president of Avalere Health, a Washington, D.C., based healthcare consulting firm, to weigh in.

Managed Healthcare Executive: When reviewing the proposed rule, what three elements/changes included do you think will have the biggest impact on the industry?

Carpenter: The rules show a clear focus by the administration on refining the risk adjustment model to better predict risk and, in turn, better compensate plans.  The three highest impact changes would include:

• Risk adjustment scores would be updated to reflect partial year enrollment;

• Risk adjustment scores would be updated to reflect enrollee use of certain prescription drugs associated with higher costs; and

• The introduction of an element of reinsurance to help compensate plans for high cost enrollees.

Managed Healthcare Executive:How will these changes impact industry the health insurance exchanges and the plans offering coverage through the exchanges?

Carpenter: The changes are reflective of some issuer concerns with the accuracy of the current risk model and the risk pool overall. Generally, risk mitigation programs that compensate plans appropriately will help stabilize the market, which is also good for consumers.

Managed Healthcare Executive:Could the proposed rules make it easier for insurers to succeed in offering exchange plans? 

Carpenter: The rule definitely focuses on providing stability and predictability for the exchange market.  However, additional changes are likely necessary to restore confidence in the market and grow carrier participation and enrollment long-term. For example, further changes may be necessary related to risk adjustm\ent. The current zero sum nature of the risk adjustment transfer formula is complex and difficult for plans to predict. Also, additional work may be necessary to grow enrollment, including additional plan options to attract younger individuals and new incentives for people to choose coverage.

Managed Healthcare Executive:What other key takeaways would you share with our readers?

Carpenter: Especially compared with earlier years, the rule contains relatively few consumer-oriented changes.  There are no aggressive proposals around networks or non-discrimination. This focus is not surprising given the uncertainty in the current exchange market. Overall, a stable market and a choice of carriers benefits consumers. The changes proposed in the rule are in support of these goals, but additional reforms may be necessary.