After freezing risk adjustment payments earlier this month, CMS has issued a final rule saying they will continue risk adjustment payments to insurances under the Affordable Care Act.[1]

In simple terms CMS had originally said it was going to wait for a court ruling on risk adjustment payments before paying out insurers for 2017 and would freeze payments from here forth until a ruling came in. However, they have reversed this after learning the ruling would not be made in time and the freeze would cause some insurers to raise rates or flee the market.

In response to this CMS has issued a final rule securing payments for 2017 and for years moving forward.

To get the full story in CMS’s own words, see: CMS Adopts the Methodology for the Permanent Risk Adjustment Program under the Patient Protection and Affordable Care Act for the 2017 Benefit Year.

NOTE: Risk adjustment payments come from a provision of the Affordable Care Act that distributes funds to insurers who end up with more sick and costly customers. The idea being that since insurers can’t discriminate based on pre-existing conditions under the ACA, this provision helps incentivize insurers to offer plans in all markets and helps to offset the risk of taking on a disproportionate amount of sick people. Without the provision insurers would need to price in the risk. Although the government makes these payments, taxes on insurers and health plans help offset these costs in theory.

Citations

  1. CMS Adopts the Methodology for the Permanent Risk Adjustment Program under the Patient Protection and Affordable Care Act for the 2017 Benefit Year. CMS.Gov.

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On March 25, 2016, CMS hosted a public conference and released a white paper to review risk adjustment methodology and build on the first several years of experience. The white paper examined proposals to account for partial year enrollees and prescription drug use in the risk adjustment model. CMS intends to propose that the risk adjustment model begin to account for partial year enrollees in the 2017 benefit year, and begin to account for prescription drug utilization in the 2018 benefit year. Beginning in 2017 , HHS will also begin to incorporate preventive services into their simulation of plan liability, and will incorporate different trend factors for traditional drugs, specialty drugs, and medical and surgical expenditures. This is intended to better reflect the growth of prescription drug expenditures compared to other medical expenditures. The risk adjustment model will be recalibrated using the most recent claims data from the Truven Health Analytics 2012, 2013, and 2014 MarketScan Commercial Claims and Encounters database (MarketScan). In response to issuer feedback from the 2014 benefit year of the risk adjustment program, CMS will also begin providing insurers with early estimates of health plan specific risk adjustment calculations. This is intended to give plans more timely information in order to set premiums. In addition, CMS has indicated that it is exploring other options to modify the permanent risk adjustment program to better adjust for higher-cost enrollees, as the temporary reinsurance program phases out in 2016.