Risk Adjustment Lawsuit Fallout True BUSINESS PowerPoint - PowerPoint PPT Presentation

B EYOND THE N UMBERS Risk Adjustment Lawsuit Fallout True BUSINESS PowerPoint Presentation Template PRESENTED BY Michael Cohen, PhD July 12, 2018 Page 1 Chia Yi Chin, ASA, MAAA

Agenda  Background on Risk Adjustment  Recent Risk Adjustment Court Cases  CMS Reactions to Recent Court Case  Knowns and Unknowns  What to Watch For Page 2

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) Page 3

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 Page 4

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.” Page 5

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 Page 6

What to Watch For?  Judge Response Hearing on reconsideration was June 21 st 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 Page 7

UPDATE- New Guidance JULY 13 th 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. Page 8

Questions Page 9

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 Page 10