National Association of Insurance Commissioners Addressing Risk Brian Webb National Association of Insurance Commissioners September 2011

PPACA Implementation Timeline 2010 2011 2012 2013 2014 2015 2016 2017 Temporary High Risk Pool Program Temporary Reinsurance Program For Early Retirees Immediate Market Reforms: No Lifetime Limits Restricted Annual Limits Restrictions on Rescission First Dollar Coverage of Preventive Services Extended Dependent Coverage Internal/External Review No Pre-Existing Conditions for Children Disclosure of Justifications for Premium Increases Medical Loss Ratios with Rebates Exchanges Subsidies Individual/Employer Mandates Market Reforms Guaranteed Issue No Pre-Existing Condition Exclusions for Adults Rating Rules Essential Benefits No Annual Limits for Essential Benefits Co-Op Plans & Multistate Plans Risk Adjustment Individual Market Reinsurance and Risk Corridor Programs

2014 Market Reforms Single Risk Pool Requirement Guaranteed Issue No Pre-Existing Condition Exclusions for Adults Rating Rules No health status 3 : 1 maximum variation for age 1.5 : 1 maximum variation for tobacco use Single Risk Pool Requirement Essential Benefits Package Individual Mandate Employer Responsibilities

Small Group Premium Variation ME NH VT WA MN MT ND WI MA NY OR RI ID SD MI PA IA CT WY OH NE NJ WV MD VA DE NV MO IL IN UT KS KY CA CO DC TN NC AR OK GA SC AZ MS NM AL LA HI TX FL AK Rating Schemes Rating Band Variability: Community Rating 13:1 or less Adjusted Community Rating 13.1:1 – 19:1 *Note: Michigan HMOs and Blue Cross/Blue Shield are restricted to 3.12:1 maximum variation. All others may use 3.96 maximum variation No Rating Structure 19.1:1 – 25:1 25.1:1 or greater

Individual Market Rating ME WA MN VT NH MT ND MI NY WI MA OR ID SD PA RI WY IA CT OH NE IL IN NJ WV MD VA DE NV MO UT KS KY CA CO NC DC TN AR OK AL GA SC AZ MS NM LA HI FL TX AK No Rating Structure Community Rating Adjusted Community Rating Rating Bands Hybrid Michigan Blue Cross/Blue Shield must use community rating. There is no rating structure for other carriers.

Addressing Risk Temporary? Reinsurance Risk Corridors Ongoing: Single Risk Pools Risk Adjustment

Risk Adjustment Participants: Establishment: Non-grandfathered individual Non-grandfathered small group Inside and outside the Exchange Establishment: State may establish if state operates Exchange HHS will establish if state does not

Addressing Risk: Risk Adjustment (Ongoing) Risk Adjuster Exchange Plans Non-Grandfathered Plans Risk $ $ $ $

Risk Adjustment: NPRM Methodology: HHS will develop a methodology – similar to Parts C and D in Medicare A state may use alternative, if certified by HHS HHS-certified alternatives may be used by other states HHS methodology will be published in a Federal Notice of Benefit and Payment Parameters – with public comment State alternative must be published in a state Notice of Benefit and Payment Parameters Must include factors, weights, data collection strategy, and nay adjustments to determine actuarial risk

Risk Adjustment: White Paper Questions: Choices in developing a risk adjustment model Prospective or concurrent or mix? Options for calculating and balancing payments and charges “Baseline premium” and budget neutrality Issues created by permissible rating factors Methods for dealing with different benefit levels Accounting for other payments and reforms

Conclusion Next Steps Comments on NPRM due Oct 31st Comments on White Paper ongoing Part of state planning discussions Discussions at the NAIC

Questions? Brian Webb Jolie Matthews Manager Senior Health & Life Counsel Health Policy and Legislation jmatthews@naic.org bwebb@naic.org 202-471-3982 202-471-3978 Josh Goldberg Health Policy and Legislative Advisor jgoldberg@naic.org 202-471-3984