Incorporating Prescription Drugs Into Affordable Care Act Risk Adjustment.

BACKGROUND: The 2010 Patient Protection and Affordable Care Act reformed the individual and small group health insurance markets and established a risk adjustment program to create a level playing field for competition. A new set of predictive models for measuring enrollee risk across plans was developed for the Patient Protection and Affordable Care Act-reformed markets, referred to as the Department of Health and Human Services Hierarchical Condition Category (HHS-HCC) models. Beginning in 2018, selected prescription drug classes were added to the models as risk markers. OBJECTIVE: We describe the motivations, concerns, methodology, and results of adding prescription drug utilization to the HHS-HCC models. METHODS: Separate HHS-HCC models are estimated by enrollee age and plan actuarial value. We defined and added 10 prescription drug classes, called RXCs, to the HHS-HCC adult models. RESULTS: Using selected RXCs alongside demographic and diagnostic indicators yielded modest overall improvement in HHS-HCC models' predictive power. Also, adding RXCs captures the higher costs of enrollees taking certain expensive pharmaceuticals and allows imputation of diagnoses for enrollees utilizing a drug but lacking the associated diagnosis. CONCLUSIONS: Including selected drugs in risk adjustment improved the models' predictive power. In addition, inclusion of selected drugs may discourage insurers from using formulary and drug benefit design to avoid enrollment of patients taking high-cost drugs, such as for HIV, multiple sclerosis, and rheumatoid arthritis, and improve access for enrollees taking these drugs. Adding RXCs also may improve plan risk measurement for plans with less complete diagnosis reporting.

A Comparison of Health Risk and Costs Across Private Insurance Markets.

BACKGROUND: The Patient Protection and Affordable Care Act (PPACA) established new parameters for the individual and small group health insurance markets starting in 2014. We study these 2 reformed markets by comparing health risk and costs to the more mature large employer market. STUDY DATA: For 2017, claims data for all enrollees in PPACA-compliant individual and small group market plans as well as claims data from a sample of large employer market enrollees. VARIABLES AND METHODOLOGY: Risk scores and total (unadjusted and risk-adjusted) per-member-per-month (PMPM) allowed charges. Differences across markets in enrollment duration, age, and geographic distribution are addressed. The analysis is descriptive. RESULTS: Compared with large employer market enrollees, health risk was 3% lower among PPACA small group market enrollees and 20% higher among PPACA individual market enrollees. After adjusting for differences in health risk, enrollees in the PPACA individual market had 27% lower PMPM allowed charges than enrollees in the large employer market and enrollees in the PPACA small group market had 12% lower PMPM allowed charges than enrollees in the large employer market. CONCLUSIONS: On average, the PPACA individual market enrolls sicker individuals than the 2 group markets. But this does not translate to higher health costs; in fact, enrollees in the PPACA individual market accumulate lower allowed charges than enrollees in the large employer market. Lower-income enrollees particularly accumulate lower allowed charges. Narrower networks and increased enrollee cost-sharing among individual market plans, though they may reduce the value of coverage, likely significantly reduce allowed charges.