Addressing Risk

Brian WebbNational Association of Insurance Commissioners

September 2011

PPACA Implementation Timeline

2010 2011 2012 2013 2014 2015 2016 2017Temporary High Risk Pool Program

Immediate Market Reforms:•No Lifetime Limits•Restricted Annual Limits•Restrictions on Rescission•First Dollar Coverage of Preventive Services

Medical Loss Ratios with Rebates

Exchanges

Subsidies

Individual/Employer Mandates

Market Reforms•Guaranteed Issue•No Pre-Existing Condition Exclusions for Adults•Rating Rules•Essential Benefits•No Annual Limits for Essential Benefits

Risk Adjustment

•Extended Dependent Coverage•Internal/External Review•No Pre-Existing Conditions for Children•Disclosure of Justifications for Premium Increases

Individual Market Reinsurance and Risk Corridor Programs

Temporary Reinsurance Program For Early Retirees

Co-Op Plans & Multistate Plans

33

2014 Market Reforms2014 Market Reforms• Guaranteed IssueGuaranteed Issue• No Pre-Existing Condition Exclusions for AdultsNo Pre-Existing Condition Exclusions for Adults• Rating RulesRating Rules

– No health statusNo health status– 3 : 1 maximum variation for age3 : 1 maximum variation for age– 1.5 : 1 maximum variation for tobacco use1.5 : 1 maximum variation for tobacco use

• Single Risk Pool RequirementSingle Risk Pool Requirement• Essential Benefits PackageEssential Benefits Package• Individual MandateIndividual Mandate• Employer ResponsibilitiesEmployer Responsibilities

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ME

NY

PA

NH

CT

VT

MA

NJ

VA

NC

SC

GA

FL

WV

KY

ALMS

MIWI

MN

IA

HI

AK

KS

NE

ND

SD

MO

IL IN

TX

MT

ID

NVUT

WY

CO

NMAZ

CA

OR

WA

LA

AROK

OH

MD

DE

RI

Community Rating

25.1:1 or greater

Small Group Premium Variation

DC

Adjusted Community Rating

Rating Band Variability:

No Rating Structure 19.1:1 – 25:113.1:1 – 19:113:1 or less

*Note: Michigan HMOs and Blue Cross/Blue Shield are restricted to 3.12:1 maximum variation. All others may use 3.96 maximum variation

TN

Rating Schemes

55

ME

NY

PA

NH

CT

VTMA

NJ

VA

NC

SC

GA

FL

WV

KY

TN

ALMS

MIWI

MN

IA

HI

AK

KS

NE

ND

SD

MO

IL IN

TX

MT

ID

NVUT

WY

CO

NMAZ

CA

OR

WA

LA

AROK

OH

MD

DE

RI

Rating BandsHybridMichigan Blue Cross/Blue Shield must use community rating. There is no rating structure for other carriers.

Individual Market Rating

DC

Adjusted Community RatingCommunity RatingNo Rating Structure

Addressing RiskTemporary?•Reinsurance•Risk Corridors

Ongoing:•Single Risk Pools•Risk Adjustment

Risk AdjustmentParticipants:•Non-grandfathered individual•Non-grandfathered small group•Inside and outside the Exchange

Establishment:•State may establish if state operates Exchange•HHS will establish if state does not

Addressing Risk:Risk Adjustment (Ongoing)

$$

$

$

Risk

Risk Adjustment: NPRMMethodology:•HHS will develop a methodology – similar to Parts C and D in Medicare•A state may use alternative, if certified by HHS•HHS-certified alternatives may be used by other states•HHS methodology will be published in a Federal Notice of Benefit and Payment Parameters – with public comment•State alternative must be published in a state Notice of Benefit and Payment Parameters

– Must include factors, weights, data collection strategy, and nay adjustments to determine actuarial risk

Risk Adjustment: White PaperQuestions:•Choices in developing a risk adjustment model

– Prospective or concurrent or mix?•Options for calculating and balancing payments and charges

– “Baseline premium” and budget neutrality•Issues created by permissible rating factors•Methods for dealing with different benefit levels•Accounting for other payments and reforms

Conclusion

Next Steps•Comments on NPRM due Oct 31st

•Comments on White Paper ongoing•Part of state planning discussions•Discussions at the NAIC

Questions?

Brian Webb Jolie MatthewsManager Senior Health & Life

CounselHealth Policy and Legislation jmatthews@naic.orgbwebb@naic.org 202-471-3982202-471-3978

Josh GoldbergHealth Policy and Legislative Advisorjgoldberg@naic.org202-471-3984