Recently, the Department of Health and Human Services (HHS) released the 2019 Notice of Benefit and Payment Parameters, which includes the updated risk coefficients for the 2019 Affordable Care Act (ACA) risk adjustment model. HHS acknowledges that significant changes to the risk adjustment model were incorporated in 2017 and 2018, and for 2019, HHS will be calibrating the model by equally blending coefficients from the 2014 MarketScan®, 2015 MarketScan® and 2016 enrollee-level External Data Gathering Environment (EDGE) data.

Impact on the Market

Pareto Intelligence ran its ACA community’s 2017 membership and claims through the 2017, 2018 and 2019 risk adjustment models to gain a better understanding of how the model changes will impact the market. Some takeaways include:

• Continued reduction in PLRS. Since the release of the 2017 risk model, we’ve seen HHS decrease overall coefficients, which is lowering the market Plan Liability Risk Score (PLRS). This trend continues in 2019, where Pareto clients are expected to see a 2%-5% reduction in PLRS across both the Individual and Small Group markets. Note that this reduction in PLRS is market-wide, so year-over-year PLRS comparisons can be misleading without adjusting for model differences.
• Reduction in Demographic Risk. In 2017, demographics comprised 21% and 29% of overall risk for the Individual and Small Group markets, respectively. In 2019, this reduces to 18% and 25%, placing greater emphasis on complete and accurate documentation and submission of diagnostic and RXC risk.
• Significant modification made to RXCs. HHS removed two severity-only RXCs from the model in 2019 (RXC 11: Ammonia Detoxicants and RXC 12: Diuretics, Loop and Select Potassium-Sparing) and made significant adjustments to the RXC, HCC and interaction coefficients. Impacts to revenue management activities include:
  1. Lower risk coefficients for HCCs will impact gap prioritization for prospective and retrospective campaigns
  2. The importance on Rx encounter reporting is heightened now that it has a direct impact on risk scores
• Every issuer is unique. Evaluating how the model impacts your unique population is important to understand risk score shifts and establish 2019 strategies. From product pricing and risk accruals to modifying documentation improvement campaigns, the updated risk coefficients play a critical role in shaping strategies and prioritizing operations.

The dynamic analysis below provides further insights into the year-over-year model changes. The condition-specific coefficients for each year can be easily downloaded from the last tab for all models and metals. (Simply select the model and market on the right under "Dashboard Filters" then click on one of the year headers and select the View Data icon on the right.)

Pareto Clients: Log into your site to gain further insights through side-by-side comparisons of your book of business to the Pareto Community. If you are not a Pareto client, but would like to explore the impact of the new risk coefficients on your business, contact Brandon Solomon at bsolomon@paretointel.com.