New Risk-Adjustment Policies Reduce But Do Not Eliminate Special Enrollment Period Underpayment

Area of Science:

• Health Insurance Markets
• Health Economics
• Public Health Policy

Background:

• Millions of uninsured Americans are eligible for special enrollment periods (SEPs) but do not enroll in available health coverage.
• Insurers avoid marketing to SEP-eligible consumers due to concerns about underpayment by risk adjustment models for associated health risks.

Purpose of the Study:

• To evaluate the adequacy of risk adjustment payments for enrollees using special enrollment periods (SEPs) compared to those enrolling during open enrollment.
• To assess the impact of federal enrollment duration factors implemented in 2017 on risk adjustment for part-year enrollees.

Main Methods:

• Analysis of individual-market claims data from two large health insurance carriers for the year 2015.
• Comparison of risk adjustment underpayment for SEP enrollees versus part-year members who enrolled during open enrollment periods.

Main Results:

• Risk adjustment undercompensated plans for part-year members in 2015.
• Underpayment was significantly greater for SEP enrollees than for open enrollment part-year members.
• Urgent, short-term health issues appeared to be a primary driver for SEP enrollment.
• Federal enrollment duration factors were found to remedy underpayment for open enrollment members but not sufficiently for SEP enrollees.

Conclusions:

• Current risk adjustment models significantly underpay insurers for special enrollment period (SEP) enrollees.
• Existing federal enrollment duration factors do not fully address the underpayment for SEP enrollees.
• Further increases in risk adjustment payments for SEP enrollees are likely necessary to incentivize carriers to recruit and retain this population.