@sacksdaniel @larry_levitt @onceuponA yep, it’s an adventure. RA skill least needed for ESI large group > Medicare Adv. >Medicaid>ACA QHP
— Richard Mayhew (@bjdickmayhew) July 6, 2016
I am going down the risk adjustment rabbit hole as another co-op bit the dust in Oregon over the weekend. They expected to get a net inflow of risk adjustment money but actually had to pay out:
The Oregon Department of Consumer and Business Services, which regulates insurance, is taking action to shutter the carrier after the Centers for Medicare and Medicaid Services announced last week the CO-OP owes about $900,000 to the federal risk adjustment program, which pays health insurers that take on a disproportionate number of sick enrollees under the Affordable Care Act. The CO-OP expected to receive about $5 million from the program.
That is a six million dollar swing for a small insurer. That was roughly 15% of 2015 premium revenue as a balance sheet shock combined with the auditors insisting on a revision for current year risk adjustment accounting as their model was atrocious.
Risk adjustment is hard. Operating in a revenue neutral risk adjustment environment is probably the hardest technical challenge for the major market segments when we restrict the task domain to only risk adjustment. The co-ops were underfunded, understaffed, and then thrown in with the sharks.
Large group employer health insurance risk adjustment is easy. There is none. Insurers need to know how to identify, price and manage risk for large groups that are fully insured. They merely need to be able to pay claims and interface with members and providers when they are the third party administrator (TPA) for large groups that pay their own claims. An insurer does not need to manage their claims universe against external templates to gain or lose revenue.
Medicare Advantage has risk adjustment but it is fairly straightforward. A diagnosis triggers a widget payment. That widget payment is the same no matter what other insurers are doing. There is an advantage of having deep data sets and technical capacity but the projection is simple. Seven additional Type 2 Diabetes and an epilepsy diagnosis are worth X. That makes chasing codes fairly straightforward.
Medicaid managed care risk adjustment may be a bit tougher. Each state chooses their own methodology. Some states use a widget payment system where the logic is similar to Medicare. Other states use revenue neutral risk adjustment. This is where things get complicated. What Insurer A gets paid depends on what Insurer B submitted. A dollar that Insurer A receives is a dollar that Insurer B is losing. This creates a Red Queen race where insurers attempt to code as aggressively as possible not to maximize their revenue but to minimize their potential losses.
Medicaid (and Medicaid Expansion) has the advantage of having fairly long history so the broad contours of a program are predictable.
Exchange/QHP risk adjustment is also revenue neutral. The issue that makes this risk adjustment more technically difficult than Medicaid revenue neutral risk adjustment is that the population and the program are still new. It is hard to make a good guess that a given population with a given diagnosis profile is X% healthier or sicker than the state comparison pool.
It is that inability to accurately project an insurer’s own population relationship to the state wide covered population that is killing the co-ops. And that is a very tough thing to do well.
I'mNotSureWhoIWantToBeYet
Interesting, but a little over my head.
If I may take a related tangent:
In the last year or so, my dad and J have had to do a bunch of insurance paperwork filing on their own. J’s physical therapist doesn’t take insurance, so J has to do the filing on her own to get reimbursed. There have been times when she’s had to resubmit things, supposedly due to “using the wrong codes”.
I’m not sure the details of my dad’s situation (he’s 80, retired with good insurance from his large employer but they started phasing things out for retirees so he had to get some different policy in addition to Medicare). He and his doc apparently were having trouble coming up with the correct IDC-10 codes for his hay-fever diagnosis and treatments. So he was telling me about his online searches, the differences between IDC-8 (IIRC) and IDC-10, finding various things about the correct codes for injuries due to being Struck by a Duck vs Struck by a Goose, the RWNJ memes about how this is all a Conspiracy™ by the CDC and Obamacare, etc.,…
Our ENT doc is retiring after 33 years, and one of the reasons she cited was the various electronic billing/recordkeeping/insurance issues these days. Our single-proprietor PCP is also struggling with the recent changes, too.
I see the value in the IDC-10 (as I understand it, it’s a WHO standard worldwide and has the promise to make the whole world safer and healthier by letting us know about epidemics and weird diseases faster, figure out the best ways for treatment, figure out where money is being wasted, etc.). But man, this transition period is pissing off a lot of people and feeding a lot of RWNJ memes about how horrible the government is.
:-(
How are you seeing things from the inside? Is this transition ever going to end? Is there a light at the end of the tunnel? Do Giant Evil Insurance Companies send paperwork back with “wrong codes” as a way to mess with people and delay payments, or are they overworked and don’t have staff to fix simple errors, or are they somehow constrained by laws or regulations to make them piss-off their policy holders and physicians so much?
Thanks. I appreciate your clear and thoughtful posts on these topics.
Cheers,
Scott.
Richard Mayhew
@I’mNotSureWhoIWantToBeYet: All of the above… longer post tomorrow
MomSense
If a co-op closes outside the open enrollment period, do the customers have a window in which they can sign up with another insurer?
Asking for a friend, and for myself.
Brachiator
@Richard Mayhew: Did you see or comment on this article which recently appeared on the Motley Fool website?
According to the authors of the study, this had a significant impact on the decision of younger, otherwise healthy people, who elected to avoid getting health insurance.
I'mNotSureWhoIWantToBeYet
@MomSense: That sounds like one of those official “Events” that let an affected person make changes to their insurance. I can’t imagine why it wouldn’t, but RM would know for sure.
Good luck!
Cheers,
Scott.
Richard Mayhew
@Brachiator: yep, saw that, and it makes sense. The tobacco surcharge raises the premium (as subsidies don’t adjust to cover the surcharge) so working poor are priced out. Young smokers are far less likely to have other needs for insurance, so another 40% or 50% in post-subsidy premium is not worth it so they say fuck it.
Richard Mayhew
@MomSense: Yes, it would be a loss of qualifying coverage which automatically triggers a special enrollment period. The big problem is that the deductible dollars don’t carry over. You’ll have to respend to your deductible.
MomSense
@Richard Mayhew:
Grrrreat. Thanks for the info.
hollyluja
I work on RA for a large insurer in Oregon and we’ve been asking the state All Payer/All Claims group for past encounters (with other companies) on our new members, to try to get a more accurate forecast. No luck so far, but wouldn’t that make sense?