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  #1  
Old 08-28-2017, 01:57 PM
New York Actuary New York Actuary is offline
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Default Insurer to Exit New York

Northwell's insurance company is leaving New York. They claim it is because of the federal risk adjustment program:

https://riverheadlocal.com/2017/08/2...l-subscribers/
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Old 08-28-2017, 02:08 PM
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Thanks!

Some painful typos in that news article ("it denied one companies claim for $70 million").

If they're required to pay $112 million in risk adjustment, then ostensibly their members were healthier than average and they should have been receiving excess premium beyond what was necessary to cover their claims (in other words, the problem was insufficient pricing, not risk adjustment payments). Alternatively, their coding processes may not have been consistent with best practices (and they were paying for things but not getting credit for them).

The risk corridors issue is a genuine one.
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Last edited by DoctorNo; 08-28-2017 at 02:12 PM..
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Old 08-28-2017, 04:26 PM
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Originally Posted by DoctorNo View Post
Thanks!

Some painful typos in that news article ("it denied one companies claim for $70 million").

If they're required to pay $112 million in risk adjustment, then ostensibly their members were healthier than average and they should have been receiving excess premium beyond what was necessary to cover their claims (in other words, the problem was insufficient pricing, not risk adjustment payments). Alternatively, their coding processes may not have been consistent with best practices (and they were paying for things but not getting credit for them).

The risk corridors issue is a genuine one.
Yea, I noticed the typos too!

Last edited by New York Actuary; 08-29-2017 at 09:25 AM..
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Old 08-29-2017, 09:08 AM
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Thanks!

Some painful typos in that news article ("it denied one companies claim for $70 million").

If they're required to pay $112 million in risk adjustment, then ostensibly their members were healthier than average and they should have been receiving excess premium beyond what was necessary to cover their claims (in other words, the problem was insufficient pricing, not risk adjustment payments). Alternatively, their coding processes may not have been consistent with best practices (and they were paying for things but not getting credit for them).

The risk corridors issue is a genuine one.
I was thinking the exact same thing. I'm puzzled why in the fourth year of the program insurers still are having trouble understanding that good risk and low claims will result in a high risk assessment transfer. You can't have you cake and eat it too.

I also agree that it could be due to poor coding practices. However, my experience with claims systems and claims billing suggests that this impact is much smaller then many people claim. Before anyone jumps on me, I do understand that a poorly coded company will suffer compared to a well coded company. My experience at various companies reveals similar patterns of both systemic data issues and billing practices. In other words, I think (based upon a small size of six) that most companies are similar and therefore the risk model balances out fairly well.
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Old 08-29-2017, 09:10 AM
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The thing about risk adjustment is that no one ever thinks that it's fair - people paying in think that they shouldn't have to pay in at all, and people receiving think that they should get more.

We looked a bit at the value of ACA coding improvement many months back, which in retrospect is still a fun read:

http://www.milliman.com/insight/2016...arket-effects/
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Old 08-29-2017, 10:05 AM
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... no one ever thinks that it's fair - people paying in think that they shouldn't have to pay in at all, and people receiving think that they should get more.
Robin Hood made it work, didn't he? I guess the Sheriff wasn't happy.
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Old 08-29-2017, 11:18 AM
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If anyone thinks its fair then it probably isn't working correctly.
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Old 08-29-2017, 12:37 PM
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Originally Posted by DoctorNo View Post
The thing about risk adjustment is that no one ever thinks that it's fair - people paying in think that they shouldn't have to pay in at all, and people receiving think that they should get more.

We looked a bit at the value of ACA coding improvement many months back, which in retrospect is still a fun read:

http://www.milliman.com/insight/2016...arket-effects/
I have been on both sides of the equation. In full disclosure though, NY has had some of the most extreme gross values reported nationwide, especially in small group. I haven't dug heavily for papers with PMPM comparisons, but it does seem the volatility/swings in risk adjustment is of research there.
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Old 08-29-2017, 12:51 PM
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NY has had some of the most extreme gross values reported nationwide, especially in small group.
This doesn't surprise me, since the risk adjustment calculation is (essentially) based upon "what you'd have liked to have charged" less "what you were allowed to charge", and New York has significant restrictions on the second component.
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Old 08-29-2017, 01:40 PM
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This doesn't surprise me, since the risk adjustment calculation is (essentially) based upon "what you'd have liked to have charged" less "what you were allowed to charge", and New York has significant restrictions on the second component.
Yes, NY requires 1:1 as opposed to 3:1 age rating. That alone increases transfers compared to other states. It also provides incentive for the youngest individuals to not purchase insurance which drives up the statewide average premium. So a double whammy.

But as someone pointed out, after four years carriers should know this by now.

Thanks for the link above Dr. No!
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