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planning ahead: tactics for success in commercial risk adjustment

August 17, 2016

The Centers for Medicare & Medicaid Services (CMS) released its 2015 Payment Transfer Report on June 30, 2016. Now that plans have had a chance to digest their results, we asked our in-house experts for insight on what plans should be considering as they prepare to begin submissions for benefit year 2016.

Q. There were many key learnings that came from the first year of commercial risk adjustment. What are some of the critical takeaways we can glean from year two?

Based on the recent results of year two, the methodology of the program seems to be working as intended. Organizations can compare their results to other issuers in their markets on a per-member per-month basis to understand how they are performing against the competition. There are many factors that health plans should be focusing on within their risk adjustment programs, as small changes in risk scores can still have a large impact on risk transfer results. Issuers must pay attention to their risk profile in each market (individual and small group), as well as both on-exchange and off-exchange plans. Attention to off-exchange plans is critical as this appears to be the key growth area for enrollment in Qualified Health Plans (QHPs).

Q. There’s been a lot of talk lately in the news about health plans losing money with the risk adjustment transfers, but it seems to target smaller health plans. Why do you think they’re struggling more than the larger plans?

Due to the volume of their membership, larger plans tend to have more flexibility in the plan and benefit offerings they provide. They are also able to work more closely with their provider network, which allows them to have more power to negotiate contracted rates. Larger plans are also able to spread their risk across their membership as well as the various regions in which they participate. Despite these advantages, it is clear from the recent pullback from the ACA Marketplace by United, Aetna, and Humana that QHPs will have to attract more healthy members to balance the risk pool and stem losses.

Q. What tactics are successful plans executing that unsuccessful plans might not be aware of?

The quality of data submitted to EDGE servers is still extremely important. An issuer’s member and claims data should be accurately submitted and reconciled relentlessly. Issuers should be auditing their systems for completeness on all types of claims, including capitated, fee-for-service, and vendor claims, to ensure that everything is accounted for. Another key tactic is to ensure that all claims that are eligible for risk adjustment are making it through to EDGE servers. Orphaned claims should be a priority—they need to be matched to an active enrollment period so they can be accounted for appropriately. We also suggest that plans research any claims that are not risk adjustment-eligible to see if there are opportunities to improve provider documentation or corrections that need to be made to the claims. Just because a claim is accepted at EDGE does not mean it will count towards a member’s risk score. HCC analytics and medical record coding efforts can have a positive impact on risk scores as well. Our advice to issuers is to continue to review their analytics logic to make sure they are resulting in appropriate returns. 

Q. Some say that getting the younger, healthier populations to enroll is a key to exchange success, but they also don’t help risk scores. Do you think this creates a paradox for plans trying to succeed?

Since issuers are not allowed to adversely select those that choose to enroll in their plan, it’s important for health plans to make sure they are paying attention to all of their membership. It will be vital for them to know the type of impact their members are having on their risk scores. Members with certain chronic illnesses tend to have the largest impact on a plan’s risk score, but it’s also essential to make sure the costs for taking care of these members are managed properly.  Having a healthier population as part of the membership portfolio will also allow plans to spread their risk. While healthier members do tend to lower an average risk score, they also have lower costs and require less management on the part of the health plan. It is important to remember that the goal is not to simply maximize revenue, but to efficiently align revenue with cost. Younger, healthier members may help a plan accomplish that goal.

Q. Do you have thoughts on how plans can better manage their entire population to improve their risk scores?

QHPs should be working together with their various internal departments to ensure their members are getting in to the see their doctors before the end of the year. The healthier and younger population tends to not visit a doctor unless they are sick—and they often skip their annual preventative visits. It’s important to accurately assess each member’s risk and understand his or her conditions. An untreated condition may ultimately result in higher expenses than a condition that is documented and managed early on.

Q. Any predictions for next year’s program changes from CMS and advice for how plans should prepare?

The CMS payment methodology will remain the same for benefit year 2016 as it has during the past two years of the program. This will be the last year for the reinsurance program, so issuers should be paying close attention to the data that affects both programs. It will be especially important for health plans to conduct strong risk adjustment programs this year so that the impact of the end of reinsurance will be minimal. Quality enrollment and claims data submissions along with strong suspect analytics will be essential to plans’ success—as will be the continuous tracking of retrieval and coding efforts to ensure that as many charts are captured and coded as possible.  

Q. If you could offer one piece of advice for health plans (of any size) struggling in the exchange market, what would it be?

Based on our research and analysis, if you do more, you get more. Issuers should be revisiting their suspecting logic to ensure it’s providing the best return on their investment. Results indicate a strong positive correlation between the percentage of members reviewed and overall impact on plan liability risk scores. Plans have to be aggressive in both outreach and risk adjustment strategy to move the needle! 


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As the manager of Risk Adjustment solutions, Allison supports the risk-adjusted revenue optimization needs of our commercial clients. Allison also partners with product management, analytics, operations, and client services to ensure help ensure successfully delivery of a comprehensive solution offering.

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