At the end of each calendar year, billions of dollars are transferred between health plans that participate in state-based Health Insurance Marketplaces, which offer Affordable Care Act (ACA)–compliant plans. These dollars, often referred to as risk adjustment transfer payments (RATPs), topped $18 billion nationwide in 2022, equivalent to 10% of the total premiums for ACA plans.1
The ACA risk adjustment program aims to mitigate risk for plans by redistributing funds (through RATPs) from plans with healthier enrollees to those with sicker enrollees. It was implemented, in part, to encourage plan participation in the Health Insurance Marketplaces and attempt to create a financially equitable environment for all plans. However, the program and the RATPs have become a strategic factor of the economics for ACA plans.
RATP is a zero-sum game, so there will also be winners and losers each year. As the risk adjustment dollars continue to trend higher year over year—both in absolute terms and as a percentage of premium—a health plan’s performance in the ACA risk adjustment program is becoming increasingly tied to its overall success. Poor performance can be crippling, as evident by the challenges faced by two notable ACA plans that faced nearly $2.7 billion in RATPs in 2022.2 This level of RATP is extremely hard to account for and would leave a deficit in RATPs. Such a deficit would have a material negative impact on the ACA program.
The challenges faced by plans in 2022, as well the macro RATP trends, should be a wake-up call for all health plans that participate in the ACA risk adjustment program. It is critical that health plans optimize their risk adjustment processes to ensure successful outcomes and gain a competitive edge over the market.
Below are several strategies that plans can use to excel in the ACA risk adjustment program.
Keys to Success
1. Invest in advanced analytics and reporting.
- Robust Data Integration Systems: A holistic patient view can only be achieved with integrated data. Ensure your systems can aggregate data from different sources—like electronic health records (EHRs), health information exchanges (HIEs), and pharmacy records—to get a complete picture of patient health.
- Data Validation: Regularly scour your data for anomalies. Consistent validation can identify and rectify errors, ensuring risk scores genuinely reflect patient health. A proactive approach to data validation and reconciliation can offer both accuracy and peace of mind.
- Continuous Monitoring and Reporting: Regularly monitor your risk adjustment processes and outcomes. This not only ensures compliance but also helps identify areas for improvement.
- Error Resolution Protocols: Have a clear strategy in place to address discrepancies when they arise.
2. Engage your members and providers.
- Easy-to-Use Member Portals: Engaged members are likely to offer better data and be proactive about their health. That starts with having an easy and interactive consumer tool. User-friendly platforms can encourage members to take an active role in tracking and managing their health.
- Timely and Relevant Communication: Automated reminders for regular health checks can increase data points and ensure up-to-date health information.
- Regular Training for Providers: An informed provider can be a key ally. Keep providers informed and updated about documentation requirements. Since the completeness and accuracy of clinical data are crucial for risk adjustment, training can significantly reduce discrepancies and errors.
- Documentation Standards: Regular provider seminars or workshops can clarify documentation expectations, leading to more accurate data submission.
- Feedback Mechanisms: Allow providers to offer feedback on the risk adjustment process, ensuring continuous improvement.
3. Ensure Compliance
Maintaining regulatory integrity is nonnegotiable. Staying up to date on evolving ACA and associated guidelines can prevent potential setbacks and position your organization to take advantage of any new opportunities.
- Regular Audits: Periodic checks will ensure processes align with regulatory demands and reduce the risk of penalties.
- Training: Keep your team updated on compliance requirements to ensure consistent adherence. It is also important that any process or program changes are promptly communicated and implemented across the organization.
- Vendor Oversight: A robust vendor oversight mechanism ensures that third-party engagements do not compromise the risk adjustment process. Vendor oversight should have strong governance that includes clear and objective contractual terms, performance metrics and standards, and regular communication with each vendor.
- Well-Defined Roles and Responsibilities: Establishing clarity in roles and responsibilities is foundational to the success of the risk adjustment process. By creating well-defined roles and responsibilities, organizations can ensure that every aspect of the risk adjustment process is handled efficiently. It reduces ambiguities, enhances collaboration, and ensures that each step in the process is executed by those best equipped to handle it.
4. Understand your existing and projected membership.
In the simplest terms, success in the risk adjustment program is a function of obtaining (or retaining) projected membership targets, understanding the care requirements or risks of your ACA population, and effectively managing the care delivery for your ACA population. To do this, it is important to evaluate members’ needs both retrospectively and prospectively.
- Retrospective Reviews: Dive deep into past records to ensure no condition is overlooked, capturing any missed revenue.
- Prospective Strategies: By predicting future health events, you can better allocate resources and plan for care interventions.
Winning the Zero-Sum Game
Achieving success in the ACA risk adjustment program is a delicate balancing act that requires meticulous attention to detail, forward-thinking, consistent oversight, and endless coordination. By focusing on these areas of improvement and maintaining a proactive approach, payers can ensure their operations are both efficient and compliant.
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Edited by: Matt Maslin
2. https://www.cms.gov/files/document/unpaid-by2022-ra-charges-memo-10-26pdf-508-compliant.pdf
Published February 5, 2024
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