Trump administration backs off penalizing exchange plans for not auditing risk-adjustment program

The Trump administration won't penalize insurers for failing to verify the number of severely ill patients they've enrolled through the insurance exchanges.

The Affordable Care Act established a risk-adjustment program that's aimed at preventing insurers from cherry-picking the healthiest members. Instead, the goal is to spread the insurance risk. Companies that cover people with complex health conditions receive money from companies that have generally healthier members.

Some of the biggest recipients of risk-adjustment payments for 2015 were Blue Shield of California, which received $182 million; Health Net of California, which got $126 million; and Blue Cross and Blue Shield of Florida, which got $369 million, according to a Health Affairs analysis of federal data.

The law mandated that third-party auditors and HHS validate that plans receiving risk-adjustment payments do indeed have sicker patients. However, HHS has struggled to get the program off the ground due, in part, to technical woes. Although HHS has been collecting audit data from the plans, it hasn't held them accountable for discrepancies in their sick patient volumes.

Last year, HHS said it would financially penalize plans if auditors found inconsistencies in the number of reported high-risk enrollees. However, in a little noticed memo released May 3, the CMS said it again would not hold plans accountable for non-validated high risk claims from 2016.

The decision was made after issuers and their audit firms said they needed more time to ensure successful implementation of risk-adjustment data validation.

Insurance companies are thrilled with the agency's decision and say it could be key to keeping them on the exchanges.

"We're pleased that the adjustments won't take place until next year, as this will help keep issuers in the marketplaces during such an uncertain time," said Meg Murray, CEO of the Association for Community-Affiliated Plans.

This additional year will ensure plans have the bandwidth to incorporate key processes, procedures and technical changes, said Jeffery Drozda, CEO of the Louisiana Association of Health Plans.

Companies providing coverage through the exchanges and audited in 2015 and 2016 still don't have federal data on the accuracy of their claims, according to Ceci Connolly, CEO of the Alliance of Community Health Plans.

"So it hasn't been possible to review lessons learned and strengthen the collection and reporting of diagnoses for risk adjustment," Connolly said. "That's critical, given the importance of accurate diagnosis coding in determining payments and the benefit packages that plans can offer to enrollees."

Third-party vendors for insurance companies have estimated that about 15% to 30% of high-risk claims from plans are unsupported, according to Dr. Darren Schulte, CEO of Apixio, a health data consulting firm.

However, that doesn't necessarily mean the companies are being untruthful. Payers have struggled in some instances to get medical records from providers who are unaware about the risk-adjustment audits, according to Kim Browning, executive vice president at Cognisight, a risk-adjustment consulting company.

However, there have been reportedly greater attempts to educate them by the CMS Browning said.