Colorado Division of Insurance

Risk Adjustment Question Who should administer Risk Adjustment in Colorado? Federal Government; or State Government: Use Federal Model (2012 Exchange Bill says to “strongly consider”) Develop state-specific model State-specific model must be approved by HHS

Risk Adjustment – what is it? Permanent program to be implemented in 2014, designed to align premium payments to risk across all plans in the pool Meant to protect non-grandfathered individual and small group plans, inside and outside the Exchange against adverse selection Pays health insurance carriers that disproportionately attract high-risk participants (risk factors of individuals across plans) Transfers funds from lower risk plans to higher risk plans

Risk Adjustment – who operates it? State option to operate if the State establishes an Exchange HHS will operate on behalf of a non-electing State

Risk Adjustment Considerations Risk adjustment models, are complicated and very data intensive Final details of the federal model for risk adjustment methodology will not be released until October State deadline for proposal of an alternative risk adjustment, using the risk adjustment methodology is November 2012.

Risk Adjustment Considerations No Colorado legislation authorizing a risk adjustment mechanism in Colorado State can take control of risk adjustment at a future date

Overview of Wakely Work Robert Wood Johnson foundation hired Wakely Consulting to look at various aspects of the health care reform, one being risk adjustment Wakely analyzed the final rules and made recommendations for policymakers and state officials on risk adjustment

Wakely Analysis of Risk Adjustment A critical issue for policymakers is the aggressive timeline required for implementation of these programs; a substantial amount of analysis and interaction with key stakeholders needs to be performed in a short period of time. In addition, even with good data, states, health insurance carriers, providers and members will face uncertainty.

Wakely Analysis of Risk Adjustment Risk adjustment results must be completed by June 30th in the year following the benefit year. Therefore, the federal Minimum Loss Ratio deadline will likely need to be adjusted (timing issues are acknowledged in the preamble of the final rules).

Wakely Recommendation Federal administration of risk adjustment program, at least until completion of state mandated study due December 1, 2015

DOI next steps Currently, is analyzing what would be best for the State of Colorado

Questions