Risk Adjustment Lawsuit Fallout True BUSINESS PowerPoint - - PowerPoint PPT Presentation

1 Page

True BUSINESS

PowerPoint Presentation Template

July 12, 2018

Risk Adjustment Lawsuit Fallout

PRESENTED BY

Michael Cohen, PhD Chia Yi Chin, ASA, MAAA

BEYOND THE NUMBERS

2 Page

Agenda

• Background on Risk Adjustment
• Recent Risk Adjustment Court Cases
• CMS Reactions to Recent Court Case
• Knowns and Unknowns
• What to Watch For

3 Page

Risk Adjustment 101

• Section 1343 of the ACA directs HHS to create a risk

adjustment program that applies to the individual and small group markets

• HHS outlined the methodology by which risk

adjustment would operate in the 2014 Payment Notice

• HHS updates the risk adjustment methodology

annually in a prospective manner (i.e., the Payment Notice finalized in 2018 is for the 2019 benefit year)

4 Page

Risk Adjustment Litigation

• Several companies sued HHS over its risk adjustment

methodology

• Two main cases – Massachusetts and New Mexico
• MA ruling – Everything Ok
• New Mexico ruling- HHS acted “arbitrary and capricious” in its

usage of budget neutrality/state average premium

• “Arbitrary and Capricious” is a specific legal term which

means HHS did not fully justify its actions

• As a result the Judge invalidated part of the methodology for

2014-2018

5 Page

CMS Response

• The Federal Government responded to this ruling in three ways
• Asked for reconsideration (court to change its mind)
• Asked for the ruling only to affect New Mexico
• Announced that the ruling:

“…prevents [the agency] from making further collections or payments under the risk adjustment program, including amounts for the 2017 benefit year, until the litigation is resolved.”

6 Page

What Does this Mean?

• 2017 risk adjustment transfers (both payments and

collections) will be delayed

• Legal rulings and CMS reactions to the ruling will

determine future

• HHS has a number of legal avenues to address

the Judges concerns

• HHS appears to have addressed the judge’s

concerns for the 2019 benefit year but nothing definitive

7 Page

What to Watch For?

• Judge Response
• Hearing on reconsideration was June 21st so a ruling could come

shortly

• CMS Response/Pro-Active Action
• How does CMS respond?
• Revealed Preferences
• Forthcoming Guidance
• MLR Reports, 2018 RA Data Collection, RA Audits
• Issuer Response
• More Lawsuits?
• State Responses
• Rate Filings/TBD
• Long Term Plans

8 Page

UPDATE- New Guidance JULY 13th

After the Webinar was conducted CMS released new guidance on risk adjustment.

• Guidance can be found here:

https://www.cms.gov/CCIIO/Resources/Regulations-and- Guidance/Downloads/Implications-of-the-Decision-by-United-States-District-Court- for-the-District-of-New-Mexico-on-the-Risk-Adjustment-and-Related-Programs.pdf A few highlights:

• CMS clarified that the court order did NOT affect the 2019 benefit year (only

2014-2018). CMS encouraged issuers to contact their DOI with any rate filing questions.

• 2018 risk adjustment operations (i.e., collection of EDGE data) will continue

normal operations. Same with RADV

• 2017 Risk Adjustment User Fees WILL be collected
• The court decision does not affect state operated risk adjustment programs
• MLR reporting requirements will be forthcoming.

9 Page

Questions

10 Page

Thank you!

Contact Information: Michael Cohen – michael.cohen@wakely.com Chia Yi Chin – Chiac@Wakely.com Ross Winkelman – RossW@Wakely.com Syed Mehmud – Syedm@Wakely.com