Selecting a successful risk adjustment methodology for health insurance exchanges

This presentation will outline current research on risk adjustment, discuss potential options that might work within the Health Insurance Exchange marketplace, and provide a recommended methodology for the US Department of Health and Human Services to implement nationwide. Such a methodology should account for timing (prospective, retrospective or hybridize), diagnosis group, and feasibility (administrative burden, compliance by health plans). There will also be some background given based on what states are currently discussing when they assume control of risk adjustment at a future date (e.g., California is looking at removing tobacco use/status from their risk adjustment methodology). Research Question: Which risk adjustment methodology is most likely to ensure success and accurate assessment of the cost of individuals in Health Insurance Exchanges? Potential policy options include:(1)(maintain the status quo)keep current age and tobacco status rating, hybridize prospective and retrospective timing of risk adjustment;(Luft, 2003);(2)actor in health status and chronic conditions by implementing a diagnosis-based adjustment methodology, retain current timing of risk adjustment (Luft, 2012); or, (3)implement both a condition-based and hybridized methodology.My analysis will consider feasibility, cost and effectiveness of the aforementioned policy options.