Addressing Risk

1. Addressing Risk Brian Webb National Association of Insurance Commissioners September 2011

2. PPACA Implementation Timeline 2010 2011 2012 2013 2014 2015 2016 2017 Temporary High Risk Pool Program Temporary Reinsurance Program For Early Retirees Immediate Market Reforms: • No Lifetime Limits • Restricted Annual Limits • Restrictions on Rescission • First Dollar Coverage of Preventive Services • Extended Dependent Coverage • Internal/External Review • No Pre-Existing Conditions for Children • Disclosure of Justifications for Premium Increases Medical Loss Ratios with Rebates Exchanges Subsidies Individual/Employer Mandates Market Reforms • Guaranteed Issue • No Pre-Existing Condition Exclusions for Adults • Rating Rules • Essential Benefits • No Annual Limits for Essential Benefits Co-Op Plans & Multistate Plans Risk Adjustment Individual Market Reinsurance and Risk Corridor Programs

3. 2014 Market Reforms Guaranteed Issue No Pre-Existing Condition Exclusions for Adults Rating Rules No health status 3 : 1 maximum variation for age 1.5 : 1 maximum variation for tobacco use Single Risk Pool Requirement Essential Benefits Package Individual Mandate Employer Responsibilities

4. ME MN WI PA IA OH MD NE WV VA MO KY KS TN GA SC AR MS LA Small Group Premium Variation NH VT WA MT ND MA NY OR RI SD ID MI CT WY NJ DE IN IL NV UT CO CA DC NC OK AZ NM AL HI TX FL AK Rating Schemes Rating Band Variability: Community Rating 13:1 or less Adjusted Community Rating 13.1:1 – 19:1 *Note: Michigan HMOs and Blue Cross/Blue Shield are restricted to 3.12:1 maximum variation. All others may use 3.96 maximum variation No Rating Structure 19.1:1 – 25:1 25.1:1 or greater

5. ME VT NH MN NY WI MI PA IA OH MD NE IN IL WV VA MO KY KS NC TN GA AL SC AR MS LA FL Individual Market Rating WA MT ND MA OR ID SD RI CT WY NJ DE NV UT CO CA DC OK AZ NM HI TX AK No Rating Structure Community Rating Adjusted Community Rating Rating Bands Hybrid Michigan Blue Cross/Blue Shield must use community rating. There is no rating structure for other carriers.

6. Addressing Risk Temporary? • Reinsurance • Risk Corridors Ongoing: • Single Risk Pools • Risk Adjustment

7. Risk Adjustment Participants: • Non-grandfathered individual • Non-grandfathered small group • Inside and outside the Exchange Establishment: • State may establish if state operates Exchange • HHS will establish if state does not

8. Addressing Risk:Risk Adjustment (Ongoing) Risk $ $ $ $

9. Risk Adjustment: NPRM Methodology: • HHS will develop a methodology – similar to Parts C and D in Medicare • A state may use alternative, if certified by HHS • HHS-certified alternatives may be used by other states • HHS methodology will be published in a Federal Notice of Benefit and Payment Parameters – with public comment • State alternative must be published in a state Notice of Benefit and Payment Parameters • Must include factors, weights, data collection strategy, and nay adjustments to determine actuarial risk

10. Risk Adjustment: White Paper Questions: • Choices in developing a risk adjustment model • Prospective or concurrent or mix? • Options for calculating and balancing payments and charges • “Baseline premium” and budget neutrality • Issues created by permissible rating factors • Methods for dealing with different benefit levels • Accounting for other payments and reforms

11. Conclusion Next Steps • Comments on NPRM due Oct 31st • Comments on White Paper ongoing • Part of state planning discussions • Discussions at the NAIC

12. Questions? Brian Webb Jolie Matthews Manager Senior Health & Life Counsel Health Policy and Legislation jmatthews@naic.org bwebb@naic.org202-471-3982 202-471-3978 Josh Goldberg Health Policy and Legislative Advisor jgoldberg@naic.org 202-471-3984