The CMS on Friday issued a proposed rule to tweak the way it audits the Affordable Care Act's risk-adjustment program, which is meant to reduce incentives for health insurers to cherry-pick the healthiest, low-cost plan members.
The agency proposed making technical changes to how it audits the accuracy of data submitted by payers under the risk-adjustment program, which it said would strengthen the program's integrity.
Risk adjustment shuffles money from plans that enroll relatively healthy members to plans with sicker, riskier patients. Payments and charges under the program are calculated based on patient "risk scores," which are determined by demographic information and health conditions. Insurers are audited to ensure they submit accurate data.
The changes that CMS wants to make to the way it audits risk-adjustment data include modifications to how it calculates a health insurer's "error rate," which is used to determine whether it should adjust an insurer's risk scores and payments. The error rate is based on an insurer's rate of failure to validate a members' diagnoses and conditions. HHS adjusts an insurer's risk score calculation if the failure rate goes beyond a certain threshold.
For 2019 and beyond, the agency proposed changing the way it groups medical conditions in the risk-adjustment data validation program within the same hierarchical condition category groups, which it said would better account for the difficultly of categorizing some conditions and change the way the program measures differences in risk between conditions.
The CMS also wants to reduce how much it adjusts the risk score for insurers close to the failure rate threshold. Lastly, it proposed changing the error rate calculation to mitigate adjustments that result from negative error rates that may occur when insurers don't identify patient conditions that should have been reported.
These changes would reduce potential incentives that insurers have to underreport diagnoses when they first submit risk-adjustment data to achieve greater financial benefits later on, CMS said. They would also ensure that insurers receive adjustments to their payment transfers in proportion to their diagnosis errors and aren't penalized for errors that have no effect on a patient's risk, the agency said.
Finally, CMS proposed applying the results of audit to adjust the risk scores and transfer amounts for the year being audited. Currently, the agency applies the results to the subsequent year. It said the change would address concerns about making adjustments based on error rates from the previous year's data when an insurer's enrollment and market participation could change from year to year.