Commercial Risk Adjustment: The most important thing about the ACA that nobody understands

Transcription

1 Commercial Risk Adjustment: The most important thing about the ACA that nobody understands Thursday, October 13, 2016 Noon 1:30 Pacific / 1:00 2:30 Mountain / 2:00 3:30 Central / 3:00-4:30 PM Eastern J. Gabriel McGlamery J.D. Sr. Health Policy Consultant Florida Blue

2 ACA Risk Programs: All 3Rs 2

3 ACA Risk Programs The one R that still matters 3

4 Scope of Risk Adjustment Risk adjustment isn t just for Qualified Health Plans! 4

5 Scope of Risk Adjustment 5

6 Scope of Risk Adjustment Separate Risk Pools (not to scale) 6

7 Scope of Risk Adjustment Separate Risk Pools (still not to scale) 7

8 Commercial Risk Adjustment v. Medicare Risk Adjustment Commercial Risk Adjustment Zero-Sum Money transfers between payers Demographic Differences Members might have little or no risk Different HCCs in the model Higher Churn Cloud-Based Data Submission Claims data housed on Issuer owned or Amazon Edge Server Concurrent Model Uses ICD-10 codes from the current benefit year to determine member risk. Medicare Risk Adjustment Paid by CMS All payers can have positive risk transfers Demographic Differences The more you look, the more conditions you will find Much higher premiums Centralized Data Submission Claims sent to CMS contractor Prospective Model Uses ICD-10 codes from the prior benefit year to determine member risk. 8

9 The Full Risk Adjustment Process 1. Determine which Risk Factors to use 7. CMS Software calculates Average Actuarial Risk and transmits it to CMS 2. Calculate weights for the Risk Factors 8. Payment Transfer Formula balances Average Actuarial Risk 3. Publish Methodology in the annual Notice of Benefits and Payment Parameters (NBPP) 9. CMS publishes total payments and changes. 4. Put claims and enrollment data on an EDGE Server. 10. Issuers with net charges must pay within 30 days. 5. CMS software gives each member a Member Liability Risk Score. 11. CMS disburses payment to issuers with net payments. 6. CMS software adds Member Liability Risk Scores to find Plan Liability Risk Score. 12. Data validation process determines accuracy of issuer data. 9

10 Risk Adjustment Process Parts 1, 2, & 3: Designing the Models 1. Determine which Risk Factors to use 2. Calculate weights for the Risk Factors 3. Publish Methodology in the annual Notice of Benefits and Payment Parameters (NBPP) 10

11 Risk Adjustment Process: Risk Factors Like Medicare, CRA bundles ICD-10 codes into Diagnostic Groups, which are then bundled into Health Condition Categories. ICD-10 codes Diagnostic Groups Health Condition Categories (HCCs) CRA uses 127 of the full set of 264 HCCs. 11

12 Risk Adjustment Gaps: Under the Methodology CMS Uses MarketScan claims database to generate factors for a Risk Adjustment Model. MarketScan is a Large Group claims database. The model uses 3 years of aggregated data. The data is adjusted to better match Marketplace demographics. Everyone knows it is not ideal, but it was designed as an evolving program. CMS will probably begin using payer data to calibrate by

13 Risk Adjustment Process: Risk Factors Data lags by 3 to 6 years Risk Adjustment model: Aggregated Claims Data 2011, 2012, & 2013 Proposed Finalized Applied 13

14 Risk Adjustment Process Parts 4 & 5: Applying the Models 4. Put claims and enrollment data on an EDGE Server. 5. CMS software gives each member a Member Liability Risk Score. 14

15 Coding and Risk Adjustment Members demographics and diagnosis codes are used to measure risk Hierarchical condition category (HCC) ICD-10 Code Risk Adjustment Model 15

16 Risk Adjustment Process: The Risk Factors 3 sets of models assign risk factors to HCCs: Adult Child Infant 5 Models with Factors for HCCs Platinum, Gold, Silver, Bronze, Catastrophic. Platinum, Gold, Silver, Bronze, Catastrophic. Platinum, Gold, Silver, Bronze, Catastrophic. Risk Factors are assigned for age and gender. Risk Factors are adjusted to reflect the severity of the HCC. 16

17 Risk Adjustment Process: The Risk Factors 17

18 Risk Adjustment Process: Risk Factors Demographic factor for a 29 year old woman in a silver plan. Just the demographic factor Age Gdr Plan Conditions Factors Score 22 M Bronze None Demographic factor for a 12 year old boy in a silver plan. Pregnancy HCC for an adult in a silver plan Asthma HCC for a child in a silver plan 29 F Silver Pregnancy* M Plat Asthma M 94% Slv Diabetic* ( ) x 1.12** Demographic factor for a 54 year old man in a silver plan. * No complications Diabetes HCC for an adult in a silver plan ** Utilization adjustment for participation in a CSR variant. Increased utilization because they are in a plan with a cost-sharing reduction subsidy 18

19 Risk Adjustment Process: Risk Factors Maturity Category HIV HCC = Severity Level 3 Risk replaces Adjustment demographic Process: Risk Factors adjustments for infants Immature x Severity 3 x 4 lbs = Immature Gold coverage = Risk Score Age Gdr Plan Condition Factors Score Lung cancer HCC for an adult in a platinum plan <1 4lbs Gold HIV F Plat Lung Cancer Respirator Respirator Dependence HCC for an adult in a platinum plan Demographic factor for a 63 year old woman in a platinum plan. When an individual has both respirator dependence and lung cancer, they have an additional interaction factor. 19

20 Specialty Drug Risk Factors RXC Label HCC Label Imputation Severity HIV HIV/AIDS Hep C Antivirals Chronic Hepatitis Class IB and Class III Antiarrhythmics Specified Heart Arrhythmias Antimanic agents Major Depressive and Bipolar Disorders ESRD End Stage Renal Disease Cystic Fibrosis tranmembrane conductance regulator agents Anti-Inflammatory Agents Used to Treat Inflammatory Bowel Disease Cystic Fibrosis Inflammatory Bowel Disease Insulins and Antidiabetics Diabetes Biologic Response Modifiers Acting on the Central Nervous System Disease-modifying antirheumatic drugs (DMARDs) Multiple Sclerosis Rheumatoid Arthritis and Specified Autoimmune Disorders High Severity Diuretic Congestive Heart Failure Ammonia Detoxicants Cirrhosis of Liver Disease-modifying antirheumatic drugs (DMARDs) Inflammatory Bowel Disease 20

21 Specialty Drug Risk Factors What are the solutions? Model Type How it works Issues? Imputation Severity Rx Dominant Flexible Hybrid Same Factor applies to a member based on Rx claims or diagnosis Member must have diagnosis, but gets a higher factor if they have the Rx claim. Diagnosis gets a factor, but the Rx claim gets a bigger factor. No bonus for both diagnosis and Rx claims combined. Three different factors: 1. Diagnosis 2. Rx claim 3. Diagnosis + Rx claim No severity No imputation Does not include certain severity-only situations Can create some small perverse incentives 21

22 Why does HIV stand out? HCC overpay & underpay usually balance out. An issuer with 75% of the ESRD also should have 75% of the arthritis. HIV positive population is more likely to risk select. Court cases in 2014 to limit management of HIV medication. Sudden migrations of HIV positive enrollees in early Suggesting that community groups inform members plan selection. 22

23 Specialty Drug Risk Factors Why does HIV stand out? HIV positive population is more likely to risk select. 23

24 Risk Adjustment Process Parts 6 & 7: Rolling the Members into a Plan 6. CMS software adds Member Liability Risk Scores to find Plan Liability Risk Score. 7. CMS Software calculates Average Actuarial Risk and transmits it to CMS 24

25 Accounting for Partial Year Enrollment The member s risks are rolled up to the Plan Average Liability Risk Score (PLRS) 25

26 Accounting for Partial Year Enrollment Do this for every member in the plan Multiply each member s risk score by the member months Plan Liability Risk Score Member Months Member Months Member Liability Risk Score Divide to get the Plan Liability Risk Score Add up all the member months 26

27 Example: Multiple Sclerosis 10 Members: 1 with MS & 9 average members All have 12 months of enrollment 27

28 Example: Multiple Sclerosis 10 Members: 1 with MS & 9 average members The member with MS has 6 months of enrollment 28

29 Factors for Partial Year Enrollees Adjusts adult member liability risk score based on number of months of enrollment and metal level. 29

30 Risk Adjustment Process Parts 8 & 9:The Transfer Equation or It s not Lake Woebegone 8. Payment Transfer Formula balances Average Actuarial Risk 9. CMS publishes total payments and changes. 30

31 Risk Adjustment Process Part 8: Obligatory Scary Transfer Equation Slide The final payment transfer is calculated by multiplying TPMPM and the sum of the billable member months for an issuer. 31

32 Payment Transfer Formula: State Average Premium Plan A Plan B St. Avg. Prem. Filed Premium PMPM $ $ Age Factor 1.78* 1.78* Billed Premium $ $ $ *The age factor for a 50 year old member. Standardizes premium so expensive plans don t get more money, just because they have higher premiums. 32

33 Payment Transfer Formula: Plan Premium with Risk Selection Plan A Plan B Filed Premium PMPM $ $ Age Factor Billed Premium $ $ Adj. w/risk Selection Plan A Plan B Risk Score Induced Demand Fact Geographic Fact Adjustment Fact Normalized Adj. Fact St. Avg. Prem. $ $ Plan Prem. w/risk Selection $ $ Adjust for induced demand created by subsidies Geographic factor is already included in premium. Risk Score is normalized across all issuers. In a world with risk selection Ms. B pays $13.48 more 33

34 Payment Transfer Formula: Plan Premium Without Risk Selection No difference in plan cost sharing Plan A Plan B Filed Premium PMPM $ $ Age Factor Billed Premium $ $ Adj. w/o Risk Select. Plan A Plan B Benefit Tier AV Allowable Rating Fact Geographic Fact Adjustment Fact Normalized Adj. Fact St. Avg. Prem. $ $ Plan Prem. w/risk Selection $ $ Members are both the same age. Members both live in the same rating area. So, in a world without risk selection, the members should have the same rates 34

35 Payment Transfer Formula: Transfer Payment & Financial Impact Transfer Payment Calc. Plan A Plan B Plan Prem. w/risk Selection $ $ Plan Prem. w/out Risk Selection $ $ Transfer Payment ($6.74) $6.74 Financial Impact Plan A Plan B Billed Premium $ $ Transfer Payment ($6.74) $6.74 Received Premium $ $ Claims ($210.38) ($210.38) Gross Margin $27.64 $50.01 Loss Ratio 88.4% 80.8% What you could have charged if ACA never happened. What a perfectly average plan might charge. $9 difference could be medical management, improved coding, or attracting high risk/low utilizers. Plan B wins! $9 investment = $22 profit 35

36 Risk Adjustment Process Parts 10, 11, and 12:The Bill is Due 10. Issuers with net charges must pay within 30 days. 11. CMS disburses payment to issuers with net payments. 12. Data validation process determines accuracy of issuer data. 36

37 2014 v Data What changed in the 2015 Payment Report? There was less than a 4% increase in risk scores. This is despite: Cross-year claims Fewer EDGE server submission issues Additional experience capturing diagnoses No change in the Absolute Value of Transfer as a Percent of Premium: Individual 10% Small Group 6% Little change in National Avg. Enrollment Weighted Monthly Premium: Segment Change Individual $ $ % Small Group $ $ % 37

38 Net RA Transfer as % of Premium Did it Work? 50% 30% Individual Market Transfer by Issuer Size % 25th Percentile 50th Percentile 75th Percentile 21% 10% -10% 1% 3% -10% 8% -2% -12% -30% -36% -50% Issuers with < 12,000 member months Issuers with 12,000 to 120,000 member months Issuers with > 120,000 member months

39 Did it Work? Generally, the transfers went: From issuers with low claims to issuers with high claims. From higher metal level plans to lower metal level plans. Plans with low premiums seemed profitable with large numbers of healthy enrollees, higher than expected 39

40 Did it Work? Generally, the transfers went: From issuers with low claims to issuers with high claims. From higher metal level plans to lower metal level plans. until post-transfer Plans with higher premiums or specialists started out in the red 40

41 In English Please? Risk Adjustment rewards issuers that: 1. Attract high-risk individuals. 2. Identify high-risk individuals. 3. Manage care to reduce claims. 41

42 In English Please? Risk Adjustment punishes issuers that: 1. Only attract young, low-risk individuals. 2. Fail to use market risk to set premium. 3. Fails to appropriately manage risk But CMS has adjusted improved the Risk Adjustment methodology every year, making attempts to game risk adjustment risky. 42

43 QUESTIONS?

44 To learn more about Risk Adjustment register for the upcoming webinar: Tuesday, October 25, 2016 Addressing Exchange Woes: 2018 Changes to Risk Adjustment Provisions Presenter: Richard Lieberman, Chief Data Scientist with Mile High Healthcare Analytics

45 To Complete the Program Evaluation The URL below will take you to HFMA on-line evaluation form. You will need to enter your member I.D. # (can be found in your confirmation when you registered) Enter this Meeting Code: 16AT51 URL: Your comments are very important and enables us to bring you the highest quality programs! 45