CMS Proposes Changes in Risk Adjustment Methodology

Proposing a rule to amend risk adjustment methodology for exchange plans, the Centers for Medicare and Medicaid Services (CMS) aims to improve the accuracy and effectiveness of the Affordable Care Act (ACA)-era program. The agency seeks to refine the program’s error rate calculation and risk adjustment data validation (HHS-RADV) program.

The risk adjustment data validation program is one of three premium stabilization systems established by the ACA and it is the only one still standing. It is responsible for validating the accuracy of data submitted by exchange plans that in turn calculates the funds transferred among insurers based on the risks of the individuals within their plan.

CMS is proposing three changes to the error rate calculation:

• Modifying the way it medical conditions are grouped to the same hierarchical condition category coefficient estimate groups in risk adjustment.
• Reducing the magnitude of risk score adjustments for payers close to the threshold used to determine whether an insurer is an outlier.
• Modifying the error rate calculation where outlying insurers with a negative error rate also have a negative failure rate.

Visit the Federal Registrar to view the proposed rule, or check out the fact sheet on the CMS site.

For a summary of the proposal, check out Becker’s Hospital Review. 

And take a look at Health Affairs and Modern Healthcare for more.