Risk Adjustment Presents Health Plans with Untapped Opportunity

Oct 25, 2016
Risk is an unpredictable and costly concern for Health Plans participating in the Marketplace. Where are the opportunities for better risk management?
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  • Public Exchanges

Compensating for risk is one of the major tenants of the Affordable Care Act. In theory, the risk adjustment program helps ensure the Marketplace provides a level playing field for health plans that may attract varying levels of population risk and incur higher costs. In practice, however, health plans are challenged to both manage patient health while receiving proper credit (and reimbursement) for the true risk of their population. Both must happen for patients to continue receiving high quality care while health plans remain profitable in this highly volatile line of business.

According to data from HealthScape Advisors, health plans are not receiving credit for an estimated 10 to 20 percent of their population’s true risk, leaving millions of dollars on the table simply due to inaccurate risk capture and reporting. In the most recent year, HealthScape also found that 1 in 4 plans reversed their fortune, meaning they went from receiving a risk adjustment payment to paying out or vice versa, further indicating not only a fluid Marketplace and significant shifts in the risk of populations being managed by health plans, but also inconsistency with capturing risk and reporting it.

Common Reporting Gaps

Risk Adjustment

As this example shows, disease states that are not properly documented each year create drastic variations in risk adjustment scores, highly affecting risk transfer payments. The four most common areas where health plans are vulnerable to underreporting risk include:

  • Lack of timely member insights
  • Inconsistent member behavior
  • Incomplete medical claims
  • Reporting delays

Even with Centers for Medicare & Medicaid Services’ (CMS) including some pharmacy data in future risk calculations, uncertainty remains and Health Plans cannot rely on the inclusion of this data to fully mitigate coding problems.

Health plans have an opportunity to manage their risk adjustment scores much more aggressively using diagnostic tools that put proprietary algorithms and Express Scripts prescription data to work to identify potential coding gaps and analyze profitability impact.

Express Scripts has partnered with HealthScape Advisors to offer Pareto Intelligence™, a secure, web-based solution that gives medical, pharmacy and actuarial teams timely, actionable risk intelligence for on and off-exchange (individual and small group), Medicare Advantage and Managed Medicaid lives. This allows health plans to better identify and resolve potential gaps in risk documentation.

Managing Patient Health Can Help Control and Even Prevent Risk

While accurate reporting is a critical component of success in the marketplace, it’s only one part of successfully managing risk. Fostering a healthier member population is equally important. Health plans that achieve a healthier, more adherent member population that mitigates downstream health issues are best equipped to succeed in overall profitability.

Health plans should consider additional ways to manage patient health to avoid spending and mitigate risk:

  • Improve medication adherence
  • Identify and prevent safety risks
  • Coordinate care
  • Offer specialized care
  • Reduce fraud, waste and abuse
  • Reduce prescription costs
  • Predict health outcomes
  • Optimize benefit design

Working with Express Scripts, plans can implement programs and solutions that predict potential medication nonadherence, deliver more personalized, specialized and coordinated care, reduce waste and fraud, and deliver optimal patient outcomes.

For more information about effective strategies for managing risk, read our new report “Unmanaged Risk. Untapped Opportunity.”

Author Bio

Julie Huppert
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