Have to, Want to and Risk Adjustment

I was a slob as a teenager.

I kept my room just clean enough to keep my parents off my back. If I was going to fight with them, it was because I was going to have too much fun first and not for “administrative” reasons. I had to keep my space just clean enough to avoid any health or safety violations. And that was the typical level I kept it.

One summer, I had the house to myself for a week. I worked full shifts during the day and picked up some overtime. I invited a girl who was into me and I was into her (however awkwardly) over to the house for a beer or two before we met up with some of her friends to go to a party in the woods. This plan came together on Tuesday afternoon and she was coming over on Wednesday evening. I cleaned my room for three hours that Tuesday night. I got rid of clothes that were six inches too short for me. I actually washed the blinds and the floor. Books were on either the book shelf or the top of the dresser. All of my socks and underwear went into the drawers or the hamper. I vacuumed. The room was clean enough to show off to someone I wanted to impress or at least not run away in fear.

It worked. She was impressed and then she laughed uproariously as I could not find where I had put my “go into the woods” sneakers**. They were in the “right” place instead of where I normally kept them.

I bring this up as a way to think about mandates for health insurance and risk adjustment.

Government can readily mandate that insurers must cover something. The ACA requires no cost-sharing coverage of preventive services. The definition of preventative services is determined by the US Preventive Care Task Force. Most of the required no-cost sharing care are a variety of targeted screenings or counseling. These services tend to be fairly low cost but can trigger high cost interventions if a positive result comes back.

Insurers are required to pay for these claims. Most insurers won’t raise internal barriers such as pre-authorization or step therapy for these types of claims. If they receive a claim, they’ll pay it during the normal run of business.

But insurers are not required to be thrilled to pay these claims. They are not required to push for everyone who is eligible for a screening service to get that service. The benefits of those services either accrue directly to the patient when they are told that they screening showed nothing to worry about, or will accrue to future payers who can avoid paying for high cost care that is now being avoided due to earlier interventions.

Insurers, for most preventive care services, are in the same mindset I was in as a teenager when it came to cleaning my room. Good enough was a low bar to clear. Clean claims will be paid on time and in full but without extra motivation, the business case to promote most prevention services is weak for an insurer that figures they’ll not cover that person in a few years. Motivation is needed.

There are two common ways to get insurers to care more about preventive service promotion. The first is that credentialing and quality entities can and often will give insurers significant points for having high levels of prevention claims paid. These points can be used for marketing purposes for commercial plans. More importantly, they either increase the premium levels paid by the government for Medicare Advantage or increases the probability of winning CHIP/Medicaid contracts or being preferentially placed to receive auto-enrolled random assignment. The other method is through risk adjustment. The short term cost hit can be recouped against a higher risk score. Either way, prevention pays indirectly.

As we think about loading up preventive service mandates on insurers, we need to think about how to motivate insurers to work against their business case where they’ll comply with the baseline expectations and do little beyond that.

** I never said I had good moves or was slick.