SN808,809,810: ACA Risk Adjustment

Question 1

ACA risk adjustment: how was CMS-HCC model adapted for HHS-HCC?

Answer 1

1. Prediction year: the CMS-HCC mode is prospective rather than concurrent
2. Population: the CMS-HCCs were developed from aged and disabled, not the private individual and small group
3. Type of spending: the CMS-HCCs predict medical spending excluding drug as compared to medical and drug

Question 2

ACA risk adjustment methodology addresses what 3 issues?

Answer 2

1. New population
   
   1. 1 the new population includes individuals who were previously uninspired
   2. 2 no medical claims data for the population for calibrating a model
   3. 3 use data from employer-sponsored insurance
2. Cost and rating factors-actuarial value and permissible rating
   
   2. 1 the metal levels are defined by the cost sharing the enrollee pays
   3. 2 an individual should pay higher premium for a platinum Han a bronze plan to reflect the reduced cost sharing, but should not pay more because it has sicker enrollment
   4. 3 how should the allowed premium rating for age and geographic area be netted out of risk transfer?
3. Balanced risk transfer among plans versus risk-adjusted payment to plans
   
   3. 1 in ACA risk adjustment determines risk transfers among health plans
   4. 2 the payments and chargers are balanced (i.e. The transfer sum to zero)
   5. 3 in contrast, Medicare risk adjustment is not budget neutral

Question 3

Describe the ACA risk adjustment model

Answer 3

1. Use demographics and diagnoses to determine a risk score
2. Claims data: from employer-sponsored insurance to calibrate the model
3. Model type: concurrent model
4. Adapted the HHS-HHC model from the CMS-HCC
5. Separate adult, child and infant models
   
   5. 1 adult and child models have similar specifications
   6. 2 there are four age 0 birth maturity categories and a single age 1 maturity category
   7. 3 there are 5 infant disease severity categories
   8. 4 infants also have 2 addictive terms for sex (male age 0 and male age 1)
6. Expenditures for which plans are liable. Excludes enroll cost sharing
   
   6. 1 the plan liability risk score does not equal a total expenditure risk score times AV
7. Induced demand due to cost sharing reductions: a multiplicative adjustment
8. Disease interactions indicator
9. Predicted plan liability expenditures
   
   9. 1 adults and children: the sum of age/sex, HCC, disease interaction coefficient
   10. 2 infants: the sum of maturity/disease-severity category and additive sex coefficients
10. Model calculates an individual’s plan liability risk score (PLRS)

Question 4

Describe the ACA risk transfer formula

Part 1 of 2

Answer 4

1. Output of the risk adjustment model-individual risk scores- is input to calculate the funds transferred between plans
2. If premium with risk selection minus premium without risk selection is positive, a plan receives a transfer payment, vice versa
3. The premium with risk selection reflects the health of the plan enrollees
4. The premium without risk selection is based on allowable rating favored
5. The 2 premiums are based on the product of plan cost factors, expressed relative to the state avg product, and multiplied by the state avg prem
6. (PLRSiIDFiGCFi/(sum of (SiPLRiSIDFiGCFi)-AViARFiIDFiGCFi/(sum of(SiAViARFiIDFiGCFi)))*Ps

Question 5

Describe he ACA risk transfer formula

Part 2 of 2

Answer 5

1. Variable of the risk transfer formula…
2. Plan liability risk score (PLRS)
   
   2. 1 reflects the metal level and the plan’s enrollee health status
   3. 2 caps (at 3) the number of children who can count toward family status
3. Induced demand factor (IDF): reflects induced demand of the cost sharing level
4. A geographic cost favor (GCF)
   
   4. 1 the avg silver plan premiums in an area relative to the state-wide average
   5. 2 silver premiums are standardized for age to isolate geographic difference
5. The actuarial value (AV) associated with the plan’s metal level based on each plans cost sharing parameters
6. The plan’s allowable rating factor (ARF)
   
   6. 1 reflect the premium plans are permitted to charge given the allowable rating favored
   7. 2 the ARF adjustment accounts only for age rating
   8. 3 family rating, geographic, and tobacco use are not included in the ARF
7. P is the state enrollment-weighted average premium
   
   7. 1 insurers cannot manipulate their transfer by adjusting their own plan premiums
   8. 2 ensures that risk transfers for the entire market sum to zero

Question 6

Describe the ACA premium cost sharing subsidies

Answer 6

1. Premium subsidies
   
   1. 1 subsidies lower the purchasers cost to a more affordable rate
   2. 2 must have an income between 100 and 400 percent FPL, purchase a plan in an individual exchange, and not be eligible for other coverage
   3. 3affordability is determined based on a graded scale as a percentage of income
   4. 4 affordability does not consider accumulated savings nor that older people budget a higher percentage of spending for Healthcare Services
   5. 5 The benchmark plan is the second lowest priced silver plan in the geographic region
   6. 6 if the individual select a more expensive or lower cost plan, they carry over the subsidy to the selected plan
   7. 7 primarily benefit older people, as premiums for younger are more likely to be affordable
2. Cost sharing subsidies
   
   2. 1 available for individuals below 250% of the FPL who select a silver plan
   3. 2 benefits are adjusted to the AV from 70% to 73% (200 to 250 percent FPL) 87% (150 to 200 percent FPL) or 94% (100 to 150 percent FPL)
   4. 3 Premium remains at the 70% level and the government reimburses insurers for enrich design