policy

Millions of low-income individuals in the United States will soon gain health insurance through subsidized insurance offered in the new Affordable Insurance Exchanges. Medicaid-focused health plans will serve many of these low-income individuals new to commercial health
insurance.

The federal government will use several important measures to stabilize the insurance marketsand keep health plan revenues in line with the risk of their members. These measures include riskcorridors, reinsurance and risk adjustment.

Risk adjustment is designed to help distribute payments to health plans in accordance with the health needs of their enrolled members. It will be particularly important for Medicaid-focused health plans that the government implement effective risk adjustment. The federal government has proposed using a modified version of the risk adjustment model already implemented for the
Medicare Advantage program.

In this paper, we discuss the potential effects of the proposed federal risk adjustment model to compensate Medicaid-focused health plans for adverse selection, and present recommendations for policy measures to improve risk adjustment in the Exchanges.

 

ACAP and BD Group. Improving Risk Adjustment in Health Insurance Exchanges to Promote Fair Payment. November 2012.

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