For PPACA plans, healthy may be deadlyNews added by Benefits Pro on April 24, 2014
BenefitsPro

Benefits Pro

Joined: September 07, 2011

My Company

By Allison Bell

Actuary Jac Joubert, along with a pair of Oliver Wyman analysts, say a big new federal risk-management program could pay carriers too much for covering consumers with health problems and too little for covering low-risk people.

The analysts look at how one of the Patient Protection and Affordable Care Act risk management programs might work in a new commentary.

Many carriers are familiar with the “hierarchical condition category” risk-adjustment system that the Centers for Medicare & Medicaid Services already uses to adjust for Medicare Advantage plan enrollee risk, the analysts write.

In the real world, the existing federal risk-adjustment model tends to lead to overpayments for individuals with high risk scores and underpayments for lower-risk individuals, they say.

If, for example, an issuer gets a 20 percent share of the health insurance market and attracts 5 percent fewer members with HCCs than its competitors, that could cut its operating margin by 3.4 percent, the analysts estimate, based on a review of a batch of actual Medicare Advantage market data.

Because risk adjustment can have such a big effect on margins, carriers eventually might see getting the risk scores right as a key part of their operating strategy, the analysts say.

Originally published on BenefitsPro.com
The views expressed here are those of the author and not necessarily those of ProducersWEB.
Reprinting or reposting this article without prior consent of Producersweb.com is strictly prohibited.
If you have questions, please visit our terms and conditions
Post Press Release