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How dangerous are those PPACA plan members?

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The Center for Consumer Information & Insurance Oversight (CCIIO) is helping its parent set up a system that could shift cash from plans with younger, healthier enrollees to plans with older, sicker enrollees. CCIIO — an arm of the U.S. Department of Health and Human Services (HHS) has posted a set of detailed technical instructions aimed at the insurers that will be using the new HHS risk-adjustment model.

The Patient Protection and Affordable Care Act (PPACA) requires HHS to protect health insurers against the effects of PPACA health insurance underwriting and pricing rules by running three “three R’s” risk management programs: a temporary reinsurance program that’s supposed to protect insurers against claims filed by enrollees with catastrophic health problems; a temporary risk corridors program that’s supposed to protect public health insurance exchange plan providers against bad underwriting results; and a permanent risk-adjustment program that’s supposed to protect individual and small-group carriers that insure high-risk enrollees.

Section 13431 of PPACA calls for the risk-adjustment program to protect any individual or small group plan that’s subject to the PPACA rules, whether the plan operates inside or outside the PPACA exchange system, CCIIO officials say in the model instructions. HHS will use enrollee information from a plan to calculate a plan average risk score for each covered plan, then apply a formula for deciding which relatively low-risk plans within a state will send payments to relatively high-risk plans, officials say.

The model reflects plan “metal level” differences — whether the enrollees are in the richer gold and platinum plans, or the skimpier silver, bronze or catastrophic plans — as well as the characteristics of the enrollees, officials say.

HHS has been running a separate risk-adjustment program for Medicare Advantage plan providers. Officials note that CCIIO based the new set of instructions on an earlier version posted in May 2013. One change in the new update deals with a bundled claim for a mother and newborn infant. Because there are separate adult, child and infant risk-adjustment models, and telling the difference between diagnosis codes for the mothers and the infants may be difficult, an insurer should try to provide a separate record for the mother and the infant whenever possible, officials say.

HHS has set up an e-mail mailbox for risk-adjustment model questions at [email protected]. HHS has also developed simulation software that insurers can use to estimate their plan liability risk scores.