Risk Adjustment Rollercoaster

Michael Cohen, PhD, Wakely Week in Washington Blog


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This week ACA risk adjustment took center stage after the Federal government announced it would be halting risk adjustment payments and charges until litigation surrounding risk adjustment is resolved. CMS clarified a number of sub issues on 7/12. Below is a quick summary of what happened and things to keep an eye on.

Quick Summary

HHS announced that it would not be making risk adjustment payments or collections (i.e., no money will change hands) until ongoing litigation is resolved. The ongoing litigation surrounds a US Federal district judge ruling that HHS did not properly justify the transfer formula—specifically, why risk adjustment is budget neutral. HHS responded to the ruling by A) asking for reconsideration (i.e., leave risk adjustment in effect); B) have the judge’s ruling only impact New Mexico (the state of the litigant) and C) suspend RA payments and collections (normally this physically happens at the end of July and August). The Judge is expected to respond to the request this summer.

The action has raised concerns that are both immediate (cash flow issues) and long term - the risk adjustment suspension may exist for longer periods of time.  For those interested in a more in-depth dive into the legal matters, health affairs has an excellent blog here.

Wakely recently gave a webinar on the topic which you can listen to here. It gives a great breakdown on the issues.  

New CMS Guidance On Risk Adjustment

Following CMS’ announcement on the delay of risk adjustment payments, CMS released guidance clarifying a number of (more minor) outstanding issues. You can read the guidance here.

A few highlights:

  1. CMS clarified that the court order did NOT affect the 2019 benefit year (only 2014-2018). CMS encouraged issuers to contact their DOI with any rate filing questions.
  2. 2018 risk adjustment operations (i.e., collection of EDGE data) will continue normal operations. Same with RADV.
  3. 2017 Risk Adjustment User Fees WILL be collected.
  4. The court decision does not affect state operated risk adjustment programs.
  5. MLR reporting requirements will be forthcoming.