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Setbacks and successes: What we've learned from the first year of commercial risk adjustment

Qualified health plans completed their first year of commercial risk adjustment reporting and the Centers for Medicare & Medicaid Services reported the results.

Prior to the CMS final deadline for 2014 data submission in April, qualified health plans, vendors, and CMS had to remain extremely agile and focused despite the challenges they experienced during the first year of operations.

Many plans were caught off guard with their first-year results, with some owing significant percentages of total premium revenue back to the program. These unexpected outcomes left many plans wondering what's behind the confusion and what they can do to better prepare for next year's submission season.

Growing pains

Documentation requirements changed throughout the year, data volume made it difficult to address discrepancies, and issuers had to adjust their processes to accommodate software defects along the way.

Combined, these challenges required more time and a deeper cache of resources than issuers originally anticipated.

Fortunately, even though these struggles slowed down many issuers' submission processes, most still managed to submit their claims successfully -- albeit in a condensed timeframe.

Lessons learned

For 2015, issuers will need to update their systems to accommodate the new 2015 requirements. In many cases, qualified health plans are getting ahead of the curve early on by adopting an on-premise Edge server solution.

Whether provided by a vendor or managed in-house, this solution, although resource intensive, offers the plans more control over both the actual deployment of the technology and the processing speed of their files.

While some issuers may still choose the CMS cloud-based solution hosted by Amazon Web Services, our experience indicates that in either case, issuers need time to evaluate their options and determine the most secure, efficient and cost-effective solution for the future.

Strategies for 2015 and beyond

In retrospect, qualified health plans and vendors have learned how to quickly improve their commercial risk adjustment strategies.

Embracing and understanding the complexities of the Affordable Care Act payment transfer model, along with turning their focus to performing several key activities, will help ensure a more successful and efficient 2015 season.

Strategies include:  

Validating CMS risk transfer calculations: CMS reports were issued late June 2015 and issuers should expect the need to validate CMS calculations, and prepare and submit appeals if necessary.

Ensuring all requirements are locked down for 2015: ACA risk adjustment is concurrent (i.e., the payment model is calibrated to measure expected cost in the current payment year), and the submission schedule is tight. To be on schedule, it is key that all system and data requirements are updated and tested as soon as possible. Ongoing communication with CMS can also contribute to a smoother process.

Ensuring qualified health plans have robust claims submission and supplemental risk adjustment data collection programs: Failure to collect and submit comprehensive risk adjustment data at the member level will almost certainly lead to negative payment consequences for issuers. Completing supplemental work to accurately measure and report a member's risk prior to CMS' submission deadline is key to a plan's success.

Qualified health plans should also expect to implement controls that ensure there is no attrition of claims data as the claims move through their systems and onto the Edge server.

Preparing for risk adjustment data validation: Risk adjustment data validation will be implemented on a pilot basis for benefit years 2014 and 2015, and CMS plans to start adjusting payments based on the RADV findings for benefit year 2016.

The best method for getting ahead in this program is to learn from the outcomes of any 2014 risk adjustment data validation audit in order to improve compliance procedures and properly prepare for 2015 validation activities.

As health reform continues to redefine the way issuers conduct business, it becomes increasingly critical that qualified health plans implement data strategies and technology that can keep pace with the growing demand for timely and accurate reporting.

While these strategies will aid qualified health plans in the effort to improve efficacy, many plans are also turning to the supplemental support of a vendor partner who can advise them on all stages of a successful risk adjustment program.

Sean Creighton is a 15-year veteran of the Centers for Medicare and Medicaid who recently joined Verisk Health as vice president for Risk Adjustment Solutions.

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