2015 Transfer Payment Report Analysis

The Risk Adjustment Forum & The RADV Master Class

November 11, 2016

Jason Siegel, FSA, MAAA

Senior Consulting Actuary

Agenda

• Experience by HCC / age / enrollment period

• Deep dive into metal selection & how it drives results

• Strategies for competing on the exchanges and

changes going forward

Agenda

• Experience by HCC / age / enrollment period

• Deep dive into metal selection & how it drives results

• Strategies for competing on the exchanges

• What we can expect now that Hillary Clinton has

been elected president*

* I created these slides on Monday

Sick vs Healthy

Net Income

PMPM - 1R

%

Enrollment

Members with at least one HCC $116.80 21%

Members without any HCCs ($65.65) 79%

Total ($27.34) 100%

Profitability by # of HCCs

8

-70.0%

-60.0%

-50.0%

-40.0%

-30.0%

-20.0%

-10.0%

0.0%

10.0%

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Pro

fit

Mar

gin

Enrollment Month

2014 ACA Experience by Enrollment Month

Open Enrollment

Special Enrollment

Drivers of Special Enrollment Period Experience

9

• Indicates member need

• May only collect a couple months’ premium

• Short period of time to identify HCCs

• Minimal impact from cost sharing

Partial Year Enrollment Distribution

10

Market Shifts

Some Drivers of plan selection

Unhealthy

Unsubsidized Subsidized

Healthy

Premium + OOP

Brand recognition

Network size

Premium vs Penalty

Prior selection

Brand recognition

Net Income by Metal

12

Net Income by Metal (1R)

MetalNet Income PMPM

(1R)

Net Income PMPM

(2R)

Catastrophic $49.08 61.78

Bronze ($39.52) $6.36

Silver $5.16 $56.69

Gold ($115.95) ($14.81)

Platinum ($235.51) ($89.23)

13

Drivers of Platinum Results

14

• Selection• One-time events

• Hep C drugs

• Special enrollment periods

• Risk Adjustment• Lack of granularity

• Under-coding

• Pricing• High induced demand

• Actual vs theoretical AV

• Contracting• Facility contracts hitting outlier threshold

Drivers of Silver Results

15

• Selection• Broad risk mix given CSRs

• Risk Adjustment• Induced utilization adjustment creates cash inflow

• Pricing• Cost sharing influences low income behavior more

Drivers of Catastrophic Plan Results

16

• Selection• Strong positive selection

• Risk Adjustment• Separate risk pool so no cash outflows

• Leveraging of members with any conditions

• Pricing• Does not reflect extreme healthiness of this group

• Compounded with AV impacts

• Not a competitive market

Strategies for Competing on the Exchange

17

• Get granular enough in data analysis to see what’s working and what’s not

• Offer competitive Silver and Catastrophic plans

• Drop plans before the September deadline

• Offer value based plans

• Leverage Formulary Design

• Manage the Special Enrollment Period

• Account for market exits when setting rates

• Persist older members into MA block

Identify Profitable Segmentation Pathways

18

Reality: 100 clinical categories, 5 metal tiers, 10 rating areas,

20 HIOS plan IDs, 25 demographic categories, 5 provider networks

Would create13 million data slices

19

Risk Adjustment Model Changes

20

2015• No Model Change; ICD10 Introduced

2016• Updated Data; Multiple Years

2017• Preventive Benefits; Updated Data; Rx Trends;

Partial year

2018• Rx modeling; High cost pooling; ACA data;

Premium vs claim basis; Post-year coefficients

2020• Socioeconomic / Sociodemographic variables