Centers for Medicare and Medicaid Services proposal Modifying health insurance exchange operators’ risk-adjustment formulas could help better predict costs for health enrollees. But industry watchers caution regulators that the changes could prompt insurers to pick the healthiest customers.

The change could reshuffle the winners and losers of the individual insurance market, as insurers that cover a larger percentage of healthy people will see their risk-adjusted calculations benefit relative to a larger percentage of the population.

Last month, CMS Several modifications were proposed Risk-adjusted exchange policy in the 2023 plan. Perhaps the biggest of these is changing the calibration of risk-adjusted models for adults and children to give more weight to healthier enrollees.

The exchange’s risk adjustment is designed to discourage programs from finding low-risk participants and to shift funds from insurers that cover more low-risk groups to those that recruit high-risk groups.

But under the proposed rules, current models tend to underestimate the costs for healthy players, who make up about 80% of the individual and small-group market. CMS wrote in an article that insurers expressed concern about the trend and asked the agency to study improvements to the model. white paper Published in October.

The solution proposed by CMS requires two stages. The first is essentially the same as the current risk-adjusted recalibration. But in the second stage, healthier enrollees are weighted more heavily, so the statistical model improves its cost forecast. According to CMS, this also systematically reduces the impact of very expensive registrant risk adjustment calculations.

The agency initially suggested this change to the proposed rule 2022 plan year, but decided not to finalize the policy. After commenters suggested that CMS provide the industry with more information to give them more time to consider the idea, the agency proposed the plan until new draft regulations are available. At the same time, the CMS provides technical documentation detailing its intent.

In the white paper, CMS acknowledged that if the problem is not addressed, health insurers may exit the market when they underestimate the cost of healthy enrollees.

“It’s not just a matter of volatile technology. It’s a matter of the actual health of the market,” said Amol Navathe, assistant professor of health policy and medicine at the University of Pennsylvania. “While this is a technical fix, I think the science is in the right place and the policy approach is in the right place.”

But because the model is so new, CMS needs to tread carefully, Navathe said. In particular, the agency should pay close attention to how the revised risk-adjusted model affects compensation for treating patients with certain conditions, he said. CMS found that the model significantly worsened cost predictions for 17 different disease states.

CMS “tilted the model a little bit — again, for good reason, to let the health insurance plans on the market work. But we’re tilting it in a way that could have an adverse effect on us and potentially on the individual. More worried,” Nawat Say.

CMS insisted that the fact that this new model more accurately predicted the cost of healthier enrollees (a larger population) was worthwhile despite worse predictions in some areas.

“For the lowest risk subgroup of participants, the trade-off for model improvement is worth slightly worsening the model’s fit in other domains,” the white paper said.

But Matthew Fiedler, a researcher at the USC-Brookings Shaffer Institute for Health Policy, isn’t so convinced CMS is on the right track.

This new risk-adjusted model will make recruiting healthier people more attractive to insurers, he said. Fiedler said insurers may change the design of their plans to attract healthier enrollees and deter sicker customers, perhaps by implementing a narrower provider network.

Even if plan designs remain the same, changing risk adjustments could force insurers to offer more generous plans to charge higher premiums, and allow those with less extensive plans to lower premiums and attract more cost-conscious ones, Fiedler said. customer of. Either way, the premium tax credit would shrink in value, he said, meaning net premiums for individuals eligible for the subsidy would not actually fall.

“The risk-adjustment recommendations in the rule appear to have a very different theory than the rest of the rule about what’s wrong and what’s wrong with individual markets,” Fiedler said. Additional provisions in the proposed 2023 rule specifically support the program’s nondiscrimination provisions.

Navathe said the comment period for the proposed regulation, which ends on January 27, should provide important clues about how insurers themselves view these potential issues.

Comments on last year’s proposed rule’s two-stage weighting process illustrate divisions within the health insurance industry.

Insurers including the Blue Cross Blue Shield Association, Cigna and Molina Healthcare oppose changes to the risk adjustment system and demand that Comment. At the same time, Centene supports policy changes.

The Community Health Plan Coalition is also pleased to see the proposal resurface in the 2023 Exchange Rules and supports moving it forward, said Michael Bagel, policy director for the trade association representing nonprofit insurance companies. Current risk-adjusted models do not always reflect actual patient planning services, and the recalibration proposed by CMS appears to be a big step forward, he said.

Even if the change is finalized, CMS should continue to monitor the risk-adjusted model and adjust it as necessary to account for geographic and community differences within states, Bagel said.

“They’re important changes that need to be made. I wouldn’t say they’re good changes until you see them in action and see what their actual impact is,” he said.