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February 8, 2012

Utilizing Risk-Adjustment Strategies to Navigate an Equitable Road Toward Health Care Reform

A paper authored by Jonathan Weiner, DrPH, and colleagues from the Johns Hopkins Bloomberg School of Public Health, appearing in the February 8, issue of Health Affairs, describes why health reform could lead to favorable or adverse risk selection across health plans.  The article reviews provisions within the Affordable Care Act legislation and discusses key risk- adjustment implementation issues for states establishing health insurance exchanges. The paper also presents results from a simulation using data from 5 million insured persons to show how risk-adjusted transfer payments will be essential to help minimize selection bias across participating health plans.  

“When setting payment rates for the private health plans that will insure consumers in each state’s health insurance exchanges, the differences in the medical needs of each enrollee group must be accounted for,” said Weiner, a professor in the Bloomberg School’s Department of Health Policy and Management. “If we don't allocate more funds to plans enrolling sicker persons, the health insurance exchanges and possibly health reform itself could fail, as some health plans might go under, while others could experience large windfalls.”

States have a very tight timeline to form Health Insurance Exchanges (HIEs) that will serve as the clearinghouse where millions of Americans will get access to health insurance, often with a federal subsidy. Much attention has been focused on getting the new Exchanges up and running, but the premise of this article is that in the very near future, when the HIEs are functional, the strategies and tools they will use to pay the plans and transfer resources from those plans with healthier enrollees to those with sicker ones, will rapidly become a top issue.

The analysis in this article applied the Johns Hopkins ACG System, a diagnosis-based risk-adjustment methodology widely used in over 15 nations, which is being made available to State exchanges as a public service of the University.  For more information on this methodology, go to www.acg.jhsph.edu.

Media contact: Tim Parsons, director of Public Affairs, at 410-955-7619 or tmparson@jhsph.edu.