The Center for Consumer Information and Insurance Oversight (CCIIO) recently announced that the U.S. Department of Human Services (HHS) may use a a concurrent model for risk adjustment. The overall goals of the risk adjustment model are to mitigate impacts of adverse selection and stabilize premiums in the individual and small group markets. HHS will use the Hierarchical Condition Category (HCC) classification system as a basis for the HHS risk adjustment model. This model utilizes diagnoses from all physician and hospital encounters, and profiles beneficiary medical problems with diagnostic categories (HCCs) that are not mutually exclusive. HCC classification provides a diagnostic framework for developing a risk adjustment model to predict medical spending and plan accordingly. The concurrent risk adjustment model, if implemented, will use diagnoses in the current year to predict expenditures for that same year. Importantly, HHS plans to select a different set of HCCs for the Federal risk adjustment methodology than those used in Medicare to reflect the differences in population. HCC was originally developed for CMS to do risk adjustment for Medicare Advantage and Part D prescription drug plans. The model will have to be adapted for the Affordable Care Act's (ACA's) risk adjustment due to the presence of the private insurance market.

Today the U.S. Department of Health and Human Services released a final rule implementing standards set for States related to reinsurance and risk adjustment, and for health insurance issuers related to reinsurance, risk corridors, and risk adjustment. These programs, created as provisions under the Affordable Care Act (ACA), are intended to mitigate the impact of potential adverse enrollment selection and stabilize premiums in the individual and small group markets as insurance reforms and the Exchanges are implemented, which will begin in 2014. These three programs will help ensure that insurance plans compete on the basis of quality and service as opposed to attracting the healthiest individuals (known as adverse selection). Better competition leads to improved coverage so that both healthy and sick consumers can pick the best plan for their needs. Click here for a summary of risk adjustment, reinsurance, and risk corridors.

The U.S. Department of Health and Human Services (HHS) has released a proposed rule on the American Health Benefit Exchanges under the Affordable Care Act (ACA). The proposed rule addresses standards for establishing exchanges, setting up the small business SHOP exchanges, and certifying plans for participation in Exchanges. HHS also release a proposed rule on risk adjustment and reinsurance. This proposed rule implements standards for States related to reinsurance and risk adjustment, and for health insurance issuers related to reinsurance, risk corridors, and risk adjustment, as required by the ACA. More detailed analyses on these individual rules will be forthcoming on HealthReformGPS.org