In April, the Centers for Medicare and Medicaid Services (CMS) released details for the 2020 Medicare Part D pharmacy hierarchical condition categories (RxHCC) risk score model. The model change will affect health plans differently based on demographics and other factors. Overall the model change increased low-income risk scores and decreased non-low-income risk scores.
In this paper, Milliman’s Adrian Clark and David Koenig summarize the changes in member risk scores resulting from the risk score model update. They also quantify the model change using three separate metrics: the change to the model coefficients, the overall change in risk score for a nationwide population by key enrollee characteristics, and the change to the normalization factor.
The Centers for Medicare and Medicaid Services finalized a Part D risk score model for payment year 2018. How does this model update affect plan risk scores? This paper by Milliman consultants Adrian Clark and David Koenig summarizes the changes in member risk scores that are due to the RxHCC risk score model update.
Adrian Clark and Jim O’Connor assessed the three risk mitigation programs—risk adjustment, reinsurance, and risk corridors—established by drafters of the Patient Protection and Affordable Care Act (PPACA). Here is an excerpt courtesy of LifeHealthPro.com:
“Risk mitigation programs appear to reduce financial risks to health plans,” the actuaries write. “At the same time, overly restrictive premium rate limitations can lead to high federal risk corridor payments.”
If plans do not charge premiums that are high enough to meet claims and expenses, “federal payments under the risk corridor programs will be high to compensate partially for the inadequate premiums,” the actuaries say.
“The impact of inadequate rates on a health plan’s financial viability should also be considered. This result stresses the need for the rate review process to not only guard against unduly high premiums, but also to ensure that premiums are not set too low. This is especially important in 2017 and beyond, after the expiration of the risk corridor program.”
Plans in states with fewer coverage rules today might need bigger increases than plans in other states, the actuaries say.”
The study, commissioned by the Society of Actuaries (SOA), can be found here.