Affordable Care Act rate stabilization program results should guide strategy for 2016
Earlier this year, the Centers for Medicare and Medicaid Services released the results of the first year of the reinsurance and risk adjustment provisions of the Patient Protection & Affordable Care Act.
These provisions are two of a three-part rate stabilization program designed to prevent adverse selection of individual members on the federal and state health exchanges by financially compensating issuers that have higher-risk members.
From a technical perspective, the first year of the reinsurance and risk adjustment programs was a resounding success. CMS reported that 99.7 percent of issuers who established Edge servers successfully submitted the data necessary to calculate reinsurance payments and risk adjustment transfers.
The resulting reinsurance reimbursements for certain high-cost claims, which were raised from 80 percent to 100 percent, mostly met issuers' financial expectations, despite the rate increase.
The risk adjustment transfers, however, were an unpleasant surprise for most issuers. The few companies that received risk adjustment transfers collected much less than predicted and the many issuers that paid were charged far more than estimated.
Some issuers affected by the risk adjustment payment disparity will likely choose the appeal process that was set in motion to document 2014 benefit-year data discrepancies contributing to unexpected payment amounts.
For those that paid far more or received much less than expected, the 2015 benefit year presents an opportunity for improvement.
This experience should prompt issuers to carefully examine their data collection and review processes from the 2014 submission year to identify flaws in data transformation or error reconciliation.
Learning from experience
To qualify for the reinsurance and risk adjustment payments, issuers needed to submit member enrollment, medical claims and pharmacy data through the Edge servers.
Modifying enrollment and claims data to meet CMS requirements proved to be a more challenging endeavor than originally anticipated, taking more time and requiring additional resources and costs to comply.
Data errors reported by CMS are difficult to interpret and correct, including duplicate claims, adapting interim bills, mother/baby claims, temporary-plan identifications and orphan claims.
While many of these errors were likely detected and corrected after being rejected by the Edge servers, CMS monitored error rates and contacted issuers accordingly. Issuers that were able to pre-process and validate data and correct errors prior to submission had higher acceptance rates and fewer challenges with CMS.
Preparation and expertise are essential
For the 2015 benefit-year, to maximize reinsurance and/or risk adjustment payments, minimize charges and avoid surprises, issuers needed to ensure the data sent through Edge servers was accurate, error-free and compliant with all CMS requirements.
Issuers needed to know if the information technology systems were capable of identifying and highlighting data errors that may have led to the inaccurate payments. If issuers were unable to locate or interpret any error reports leading up to the 2014 benefit-year Edge server submission, then the answer was "yes."
Issuers needed the ability to sort, filter, prioritize and summarize errors by error type, data type or error status criteria. As source data are corrected and resubmitted through the Edge server, results of the correction at the line-item level should have been tracked and presented either by member, claim, or error-type so issuers could pinpoint discrepancies and improve the accuracy of reinsurance and risk adjustment financial projections.
Likewise, issuers should have generated reports for baseline data management, data quality, risk adjustment and reinsurance reviews to help determine the accuracy of CMS's calculations and to have for an appeal, if necessary.
Edge server readiness
Although nearly all issuers who submitted data for the reinsurance and risk adjustment aspects of the rate stabilization program were able to submit data through the Edge server, the process continues to present challenges to many issuers.
For example, in late 2014, numerous health insurers requested a deadline extension on submitting claims and enrollment data over the Edge servers for the 2014 benefit-year.
To avoid these types of delays, it is important the issuer test its ability to convert source data to the Department of Health and Human Service's Edge server XML format and resolve any technical challenges. Many issuers relied on experienced Edge-server technology advisors to ensure the data submission was successful.
Outside expertise can also be beneficial in helping understand how CMS calculates reinsurance and risk adjustment payments for the ACA, which differs from other CMS programs.
For example, the ACA risk model is concurrent instead of prospective as most Medicare risk models. Leveraging a knowledgeable advisor to help understand these ACA models can avoid unpleasant surprises when the reinsurance and risk adjustment payments are announced.
As the issuer prepares for the next round of the rate stabilization program Edge-server data submission, learning from mistakes and successes of the first round will help ensure that 2016 will hold fewer unpleasant surprises and yield better financial results.
Lisa DiSalvo is vice president of Product Strategy and Development at Altegra Health.
