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Bark louder, little dog.

Sadly, media malpractice has become standard practice.

“But what about the lurkers?”

You cannot shame the shameless.

Something needs to be done about our bogus SCOTUS.

The only way through is to slog through the muck one step at at time.

Human rights are not a matter of opinion!

Usually wrong but never in doubt

They are lying in pursuit of an agenda.

A fool as well as an oath-breaker.

When they say they are pro-life, they do not mean yours.

Russian mouthpiece, go fuck yourself.

The current Supreme Court is a dangerous, rogue court.

Speaking of republicans, is there a way for a political party to declare intellectual bankruptcy?

Insiders who complain to politico: please report to the white house office of shut the fuck up.

Too little, too late, ftfnyt. fuck all the way off.

We’re watching the self-immolation of the leading world power on a level unprecedented in human history.

American history and black history cannot be separated.

Give the craziest people you know everything they want and hope they don’t ask for more? Great plan.

the 10% who apparently lack object permanence

The willow is too close to the house.

“Facilitate” is an active verb, not a weasel word.

Why is it so hard for them to condemn hate?

A thin legal pretext to veneer over their personal religious and political desires.

You are here: Home / Anderson On Health Insurance / Risk adjustment in the ACA at both ends of the spectrum

Risk adjustment in the ACA at both ends of the spectrum

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The Centers for Medicare and Medicaid Services released the 2023 risk adjustment report earlier this week.  Risk adjustment is intended to make insurers risk agnostic.  Transfers are paid within state between insurers with no additional federal dollars entering the market.  The one exception is an insurer funded catastrophic risk pool that covers a portion of claims over $1 million dollars. My friend and colleague Wesley Sanders combined the data with a few different sources of enrollment data to produce a per member per month (PMPM) transfer calculation. 

I have a few observations that I want to pull out from the Top 10 recipients and payers of risk adjustment.

Largest Reciepents of RA PMPM Largest Payers of RA PMPM
MM PMPM Transfer MM PMPM Transfer
1 68,267 738.62 45,130 -209.73
2 53,801 722.59 878,706 -184.31
3 62,943 522.43 306,751 -178.48
4 19,085 465.33 619,292 -169.04
5 334 375.05 76,501 -124.72
6 5,079 352.79 1,975,515 -116.11
7 5,555 290.13 1,489,464 -106.33
8 99,663 254.91 109,178 -103.41
9 30,680 219.52 7,331,524 -102.75
10 98,887 213.65 13,659,170 -102.37

First, look at the difference in the size of the transfers. The #1 payer pays $209 PMPM into risk adjustment.  This is smaller than the PMPM of the 10th largest recipient.  The tails are very different in the PMPM size of the transfers.

More interesting to me is the sheer difference in member months.  An enrollee can have anywhere from 1 to 12 enrolled months in a year.  Dividing total member months by 10 or 11 probably gives a decent approximation of total unique individuals enrolled.  The Top 10 net recipients are SMALL to TINY insurers.  I am trying to figure out how insurer #5 with 334 enrolled member months generates enough revenue to justify hiring an actuary to file their rates.

The net risk adjustment payers range from small-ish to really BIG.  This is interesting.  It is not unusual to see extremes of a distribution to be heavily composed of smaller entities because each enrolled individual has more variance in a small cluster than a big cluster.  But we don’t see that here.  Instead, we see some national and regional carriers having substantial payables.

We probably should think about the market dynamics where the big companies are actively seeking to enroll low risk enrollees and the small companies get extreme tail risk.

Reader Interactions

5Comments

  1. 1.

    Gin & Tonic

    Thank you for continuing to post your work here, now that you’re a PhD and all.

    I took a quick look at your question about insurer #5, and I’m wondering if that’s just a data reporting issue? They seem to be part of a substantial insurer group, operating in several states (although not long ago sanctioned in one for operating without appropriate authority.) So maybe their data are incomplete, or are showing you one state only, or something like that. Not having access to your data sources I can’t pursue this further.

  2. 2.

    BradF

    David

    Conjecture on the 334. What kind of carrier and what kind of patients? Is this an outlier coverage entity that specializes in rare diseases? What block of business is this?

    Brad

  3. 3.

    Keaton Miller

    Interesting stuff. In the Medicare Advantage context, the gestalt is that the government overpays relative to true risk, at least in part due to upcoding. Here, scale incentives might generate some of the patterns you are talking about — it’s even cheaper for big firms to insure low-risk folks.

  4. 4.

    David Anderson

    @Keaton Miller: I think the dynamics of zero sum ACA risk adjustment versus external money MA risk adjustment really matter.  In MA, every insurer has every reason to STFU about hacks and advantages as they can benefit from running something into the ground while in the ACA, some insurers have strong incentives to call bullshit and get formulas changed as they’re paying for a red queen race.

     

    I agree with you, scale probably matters a lot at the low end of the market which is only buying on premium.

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