Sorting Out the Health Risk in California's State-Based Marketplace

Area of Science:

• Health economics
• Health insurance marketplaces
• Risk adjustment

Background:

• California's state-based insurance marketplace, Covered California, aims to provide accessible health coverage.
• Understanding enrollee health risk is crucial for financial stability and accurate premium setting within insurance markets.

Purpose of the Study:

• To characterize the health risk of enrollees in Covered California.
• To analyze health risk by metal tier, region, enrollment month, and plan type.
• To inform risk adjustment and rate negotiation processes.

Main Methods:

• Utilized 2014 Covered California enrollment data linked with 2012 statewide all-payer hospitalization and emergency department (ED) visit records.
• Derived Chronic Illness and Disability Payment System (CDPS) health risk scores based on diagnoses, age, and sex.
• Standardized CDPS scores with an average of 1.00 for comparison.

Main Results:

• 9.4% of 1,286,089 enrollees had at least one hospitalization or ED visit in 2012.
• Enrollees with higher health risk selected plans with greater actuarial value.
• Health risk was higher at the beginning of enrollment compared to the end.
• Four major plans enrolled 91% of individuals, with average health risk scores close to the marketplace average.

Conclusions:

• Assessing enrollee health risk aids health plans in anticipating risk-adjustment pool contributions.
• Findings influenced rate negotiations, leading to decreased proposed rates for 2015.
• This resulted in significant premium savings for consumers.