Risk adjustment modifications in view of potential CSR subsidy termination

If the cost-sharing reduction (CSR) subsidies of the Patient Protection and Affordable Care Act (ACA) were eliminated, it could expose insurance carriers to a substantial increase in selection risk related to their particular mixes of business. In August, the Centers for Medicare and Medicaid Services (CMS) announced its intention to propose a set of risk adjustment modifications for states in which insurance carriers raise silver premiums in response to potential CSR subsidy termination.

In this paper, Milliman’s Jeffrey Milton-Hall, Doug Norris, and Jason Karcher explore the CMS proposal along with the current ACA risk adjustment program and three other potential alternative modifications to risk adjustment in response to the possible elimination of CSR funding.

Regulatory capital strategy considerations

Healthcare providers and health plans continue to integrate vertically through consolidation and virtually through accountable care organization (ACO) risk-sharing arrangements. In this article, Milliman’s Dave Liner discusses how providers and health plans can improve their financial performance by considering strategies that optimize regulatory capital.

Hepatitis C treatments: Emerging trends

The high cost of therapy for patients with chronic hepatitis C (HCV) infection has been an important topic of discussion for key stakeholders in pharmacy benefit design and management. Multiple effective treatments have been introduced, with cure rates approaching 100%.

Although costly, curing HCV early on can prevent serious liver complications, such as hepatic cirrhosis, organ failure, and cancer, for the approximately 2.7 million affected people in the United States.

In 2016, there was a downward cost and utilization trend for the HCV Specialty category. Express Scripts reported in its 2016 Drug Trend Report that utilization of HCV therapies had decreased by 27.3% and the unit cost had decreased by 6.7%. The cost per member per year (PMPY) for HCV drugs decreased to $25.26 PMPY from $38.44 PMPY the previous year.

Why have cost and utilization suddenly decreased after two years of steady growth?

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Pairing risk adjustment to support state 1332 waiver activities

Section 1332 of the Patient Protection and Affordable Care Act (ACA) allows states, starting in 2017, to waive certain ACA market rules to allow for more tailored commercial individual and small group market solutions. When states consider market reforms such as reinsurance under the 1332 Waiver with the aim of stabilizing the market and providing affordable coverage, it is important to consider the challenges and options in the context of their effects on other market stabilization mechanisms like risk adjustment. Milliman consultant Rong Yi offers some perspective in this paper.

Regulatory roundup

More healthcare-related regulatory news for plan sponsors, including links to detailed information.

New report on the ACA’s transitional reinsurance program
The Congressional Research Service has published the report “The Patient Protection and Affordable Care Act’s (ACA’s) Transitional Reinsurance Program.” The report provides an overview of the risk mitigation program. The first section of the report provides background information on reinsurance and the ACA risk-mitigation programs. The second section describes the components of the transitional reinsurance program, as well as implementation of and experience with the program. The third section discusses questions regarding the scope of the authority of the U.S. Department of Health and Human Services (HHS) to administer the transitional reinsurance program, including those raised by a 2016 Government Accountability Office report.

To download the entire report, click here.

CDC report on health insurance coverage
The Centers for Disease Control and Prevention (CDC) published a report providing health insurance estimates from the first quarter of the 2017 National Health Interview Survey. Highlights from the report include:

• In the first three months of 2017, 28.1 million (8.8%) persons of all ages were uninsured at the time of interview—0.5 million fewer persons than in 2016 (a nonsignificant difference) and 20.5 million fewer persons than in 2010.
• Among adults aged 18 to 64, 70.5% (138.8 million) were covered by private health insurance plans at the time of interview in the first three months of 2017. This includes 4.8% (9.4 million) covered by private health insurance plans obtained through the Health Insurance Marketplace or state-based exchanges.
• The percentage of persons under age 65 with private health insurance enrolled in a high-deductible health plan (HDHP) increased, from 39.4% in 2016 to 42.3% in the first three months of 2017.

To download the entire CDC report, click here.

The “Rxisk” of adjustments in 2018 ACA risk adjustment

The Centers for Medicare and Medicaid Services (CMS) is adding a new prescription drug category classification system to the 2018 risk adjustment model. Starting in 2018, a condition will be identified through a Hierarchical Condition Category with associated medical diagnosis codes, a prescribed medication, or both—each one affecting the final risk member score differently. This paper by Milliman consultants approximates the likely CMS mapping based on the publicly available information to date.