{
  "id": "R45334",
  "type": "CRS Report",
  "typeId": "REPORTS",
  "number": "R45334",
  "active": true,
  "source": "EveryCRSReport.com",
  "versions": [
    {
      "source": "EveryCRSReport.com",
      "id": 587513,
      "date": "2018-10-05",
      "retrieved": "2019-12-20T20:48:12.112451",
      "title": "The Patient Protection and Affordable Care Act\u2019s (ACA\u2019s) Risk Adjustment Program: Frequently Asked Questions",
      "summary": "The Patient Protection and Affordable Care Act (ACA; P.L. 111-148, as amended) created a permanent risk adjustment program that aims to reduce incentives that insurers may have to avoid enrolling individuals at risk of high health care costs in the private health insurance market. Section 1343 of the ACA established the program, which is designed to assess charges to health plans that have relatively healthier enrollees compared with other health plans in a given state. The program uses collected charges to make payments to other plans in the same state that have relatively sicker enrollees. The Centers for Medicare & Medicaid Services (CMS) administers the risk adjustment program as a budget-neutral program, so that payments made are equal to the charges assessed in each state. CMS assesses payments and charges on an annual basis, beginning in the 2014 benefit year. \nThe concept of risk (i.e., the likelihood and magnitude of experiencing financial loss) is at the root of any insurance arrangement. One of the ways that insurers are exposed to risk is that individuals have more information about their own health status than an insurer does. Individuals who expect or plan for high use of health services (e.g., older or sicker individuals) are more likely to seek out coverage and enroll in plans with more benefits than individuals who do not expect to use many or any health services (e.g., younger or healthier individuals). Prior to the ACA, most state laws (and federal law under limited circumstances) allowed insurers to minimize their exposure to this risk by charging higher or lower premiums to potential enrollees based on factors such as age, gender, and health status. However, under current federal law, insurers in the individual and small-group markets are unable to set premiums based on gender or health status and are limited in how much they may vary premiums by age. Without being permitted to account for the risk from individuals who expect or plan for high use of health services using the aforementioned criteria, insurers still may attempt to avoid such individuals enrolling by using networks, formularies, and other techniques that are not likely to appeal to them, though insurers are limited by other ACA requirements (e.g., they are required to offer certain benefits).\nThe ACA established the permanent risk adjustment program to try to eliminate incentives insurers may have to avoid enrolling high-risk individuals. This program, along with the transitional reinsurance program and the temporary risk corridors programs, is intended to encourage insurers to participate in the marketplace by moderating the risk and uncertainty that may reduce their likelihood to participate.\nUnder the risk adjustment program, insurers place enrollee and claims data for a benefit year on a computer server that they own but that runs CMS software. CMS\u2019s software calculates a risk score for an enrollee using that enrollee\u2019s demographic and diagnosis information and obtains summary data for each plan. CMS uses the risk scores for a plan\u2019s enrollees to calculate the difference between the plan\u2019s predicted costs for its enrollees relative to the predicted state average cost, given the health status of the plan\u2019s enrollees and the estimated premium revenue that the plan would be able to collect based on allowable rating factors, relative to the estimated state average. This difference is then multiplied by the state average premium and results in either a risk adjustment payment or charge for a given plan.\nThis report provides responses to some frequently asked questions (FAQs) about the ACA risk adjustment program. The report begins with background on the health insurance market, discusses why risk mitigation matters, and introduces the role of risk adjustment in risk mitigation. The next section describes the mechanics of the program, including how enrollee risk scores are determined and how they are used to calculate payments and charges. The report concludes with questions regarding the program\u2019s experience thus far and future changes to the program.",
      "type": "CRS Report",
      "typeId": "REPORTS",
      "active": true,
      "formats": [
        {
          "format": "HTML",
          "encoding": "utf-8",
          "url": "https://www.crs.gov/Reports/R45334",
          "sha1": "6050abdd71fb76fe5d4e635aef6cdf7919cc3573",
          "filename": "files/20181005_R45334_6050abdd71fb76fe5d4e635aef6cdf7919cc3573.html",
          "images": {
            "/products/Getimages/?directory=R/html/R45334_files&id=/1.png": "files/20181005_R45334_images_ce2f1e824c2bdcaf1655b47c36b6525bbec0126d.png",
            "/products/Getimages/?directory=R/html/R45334_files&id=/0.png": "files/20181005_R45334_images_d49ddfaccc2913dab7c4366ae2043eebcc0de418.png"
          }
        },
        {
          "format": "PDF",
          "encoding": null,
          "url": "https://www.crs.gov/Reports/pdf/R45334",
          "sha1": "1c04b07209103651a3814e5f66dacb0b4a9d8c33",
          "filename": "files/20181005_R45334_1c04b07209103651a3814e5f66dacb0b4a9d8c33.pdf",
          "images": {}
        }
      ],
      "topics": [
        {
          "source": "IBCList",
          "id": 4790,
          "name": "Private Health Insurance"
        }
      ]
    },
    {
      "source": "EveryCRSReport.com",
      "id": 586076,
      "date": "2018-10-04",
      "retrieved": "2018-10-05T22:06:32.368366",
      "title": "The Patient Protection and Affordable Care Act\u2019s (ACA\u2019s) Risk Adjustment Program: Frequently Asked Questions",
      "summary": "The Patient Protection and Affordable Care Act (ACA; P.L. 111-148, as amended) created a permanent risk adjustment program that aims to reduce incentives that insurers may have to avoid enrolling individuals at risk of high health care costs in the private health insurance market. Section 1343 of the ACA established the program, which is designed to assess charges to health plans that have relatively healthier enrollees compared with other health plans in a given state. The program uses collected charges to make payments to other plans in the same state that have relatively sicker enrollees. The Centers for Medicare & Medicaid Services (CMS) administers the risk adjustment program as a budget-neutral program, so that payments made are equal to the charges assessed in each state. CMS assesses payments and charges on an annual basis, beginning in the 2014 benefit year. \nThe concept of risk (i.e., the likelihood and magnitude of experiencing financial loss) is at the root of any insurance arrangement. One of the ways that insurers are exposed to risk is that individuals have more information about their own health status than an insurer does. Individuals who expect or plan for high use of health services (e.g., older or sicker individuals) are more likely to seek out coverage and enroll in plans with more benefits than individuals who do not expect to use many or any health services (e.g., younger or healthier individuals). Prior to the ACA, most state laws (and federal law under limited circumstances) allowed insurers to minimize their exposure to this risk by charging higher or lower premiums to potential enrollees based on factors such as age, gender, and health status. However, under current federal law, insurers in the individual and small-group markets are unable to set premiums based on gender or health status and are limited in how much they may vary premiums by age. Without being permitted to account for the risk from individuals who expect or plan for high use of health services using the aforementioned criteria, insurers still may attempt to avoid such individuals enrolling by using networks, formularies, and other techniques that are not likely to appeal to them, though insurers are limited by other ACA requirements (e.g., they are required to offer certain benefits).\nThe ACA established the permanent risk adjustment program to try to eliminate incentives insurers may have to avoid enrolling high-risk individuals. This program, along with the transitional reinsurance program and the temporary risk corridors programs, is intended to encourage insurers to participate in the marketplace by moderating the risk and uncertainty that may reduce their likelihood to participate.\nUnder the risk adjustment program, insurers place enrollee and claims data for a benefit year on a computer server that they own but that runs CMS software. CMS\u2019s software calculates a risk score for an enrollee using that enrollee\u2019s demographic and diagnosis information and obtains summary data for each plan. CMS uses the risk scores for a plan\u2019s enrollees to calculate the difference between the plan\u2019s predicted costs for its enrollees relative to the predicted state average cost, given the health status of the plan\u2019s enrollees and the estimated premium revenue that the plan would be able to collect based on allowable rating factors, relative to the estimated state average. This difference is then multiplied by the state average premium and results in either a risk adjustment payment or charge for a given plan.\nThis report provides responses to some frequently asked questions (FAQs) about the ACA risk adjustment program. The report begins with background on the health insurance market, discusses why risk mitigation matters, and introduces the role of risk adjustment in risk mitigation. The next section describes the mechanics of the program, including how enrollee risk scores are determined and how they are used to calculate payments and charges. The report concludes with questions regarding the program\u2019s experience thus far and future changes to the program.",
      "type": "CRS Report",
      "typeId": "REPORTS",
      "active": true,
      "formats": [
        {
          "format": "HTML",
          "encoding": "utf-8",
          "url": "http://www.crs.gov/Reports/R45334",
          "sha1": "c2b394b4d7ddee19f09588fba4d3a535b97a8545",
          "filename": "files/20181004_R45334_c2b394b4d7ddee19f09588fba4d3a535b97a8545.html",
          "images": {
            "/products/Getimages/?directory=R/html/R45334_files&id=/1.png": "files/20181004_R45334_images_ce2f1e824c2bdcaf1655b47c36b6525bbec0126d.png",
            "/products/Getimages/?directory=R/html/R45334_files&id=/0.png": "files/20181004_R45334_images_d49ddfaccc2913dab7c4366ae2043eebcc0de418.png"
          }
        },
        {
          "format": "PDF",
          "encoding": null,
          "url": "http://www.crs.gov/Reports/pdf/R45334",
          "sha1": "1543a617be21c2dbe36501e2979c8c3108e557e9",
          "filename": "files/20181004_R45334_1543a617be21c2dbe36501e2979c8c3108e557e9.pdf",
          "images": {}
        }
      ],
      "topics": [
        {
          "source": "IBCList",
          "id": 4790,
          "name": "Private Health Insurance"
        }
      ]
    }
  ],
  "topics": [
    "Health Policy"
  ]
}