The ACA risk adjustment system uses the average premium of a state to determine the risk adjustment value for a given disease. The dollar value is the state average premium times a national fixed co-efficient per disease category and metal band. For instance, nationally, a person with lung cancer (HCC08) has a disease specific multiplier of 12.392 if they bought Platinum and 11.807 if they bought a Bronze plan.
Average premium varies dramatically between bordering states. I am picking on Balloon-Juice world headquarters of West Virginia’s northern panhandle as the geography is something that I’m familiar with.
|State||2017 Avg Individual Market Premium|
|West Virginia||$ 693.60|
On Route 22, one can drive through Burgettstown PA, Weirton WV and Steubenville OH in less than six miles. That is three states and therefore three state average premiums. All three of those towns will send air ambulance cases to Pittsburgh. The really tough cases are likely heading to Pittsburgh as well. If someone is not going to Pittsburgh, they are likely to use Weirton Medical Center or Trinity in Steubenville without regard to what state they live in.
Let’s see what the risk adjustment value is for someone buying an individual market Bronze while having lung cancer.
In Burgettstown: $58,400
In Steubenville: $73,400
In Weirton: $98,270
These are big spreads in risk adjustment value in less than a 10 minute drive.
I’m not sure what it means.
I think that if I am an insurer that is operating in multiple states (Highmark for instance in this example), I want to get as many lung cancer patients from West Virginia into my plans as possible as I can ship them to cheaper locations for treatment. Working with the assumption that Burgettstown cancer patients are not a money pit of despair at the $58,400 risk adjustment payment level, the Weirton and Steubenville patients should be massive profit centers.
This would advantage insurers that can straddle state lines and ship/steer highly advantaged risk adjusted patients to low cost treatment centers that can provide needed care at a “reasonable” price point for the folks in the low average premium state.
There are downsides to this, I’m just not fully sure what they are yet.