Blue Cross Blue Shield - Oklahoma Reinsurance Policy Update | OpenPayer
ModifiedBlue Cross Blue Shield - OklahomaPolicy N/A
Standards Related to Reinsurance; Risk Corridors and Risk Adjustment (Final rule)
Establishes federal standards for State reinsurance and risk adjustment programs and for issuer risk corridors under the Affordable Care Act; affects States operating Exchanges, health insurance issuers, and third-party administrators in individual and small group markets.
Policy Summary
PayerBlue Cross Blue Shield - Oklahoma
PolicyStandards Related to Reinsurance; Risk Corridors and Risk Adjustment (Final rule)
Policy CodePolicy N/A
Change TypeMultiple substantive additions and clarifications
Effective DateMay 22, 2012
Next Review DateN/A
Key ActionContributing entities must submit reinsurance contributions quarterly beginning January 15, 2014.
Defined 'allowable administrative costs' as administrative costs capped at 20 percent of premiums earned and revised allowable costs to reference MLR incurred claims and include quality improvement and health IT expenditures.
Added defined term 'premiums earned' referencing MLR rule and revised 'target amount' to reference premiums earned.
Revised attribution rules so reinsurance, risk adjustment payments and charges are attributed to the benefit year to which they apply (accrual basis) rather than year of submission.
Finalized that risk corridors calculations are performed at the plan (QHP) level rather than issuer aggregation, per statutory reading.
Established requirements for QHP issuers to submit standardized data for risk corridors and to allocate shared items consistently with MLR methods, and to retain supporting records for 10 years.
Issuer requirements for risk adjustment: mandatory participation, data submission to State or HHS on State's timetable, storage per HHS/State specifications, and contractual permissibility to require providers supply data.
Issuers must submit risk adjustment data to the State, or HHS on behalf of the State, and store required risk adjustment data in accordance with the risk adjustment data collection approach established by HHS or the State.
Issuers who owe net risk adjustment charges must remit those charges within 30 days of assessment.
Issuers must retain and make available risk adjustment data and related records for ten years and comply with data validation requests by State or HHS.
When HHS operates risk adjustment, a distributed data approach will be used (data may remain with issuers); States operating risk adjustment may choose their approach.
States operating a risk adjustment program must submit annual risk adjustment program summary reports to HHS.
2014-2016Transitional reinsurance timeframe
March 1State notice publication deadline
PermanentRisk adjustment program
30 daysRemit net charges
20%Admin cost cap
Program Coverage and Operational Rules
inv-01: Program applicability and operational criteria
Program applicability and state option rules.
Reinsurance is a State option to operate; applies to non-grandfathered individual market plans inside and outside the Exchange; all issuers and third-party administrators on behalf of group health plans contribute funding.
Risk corridors are administered by HHS and apply to Qualified Health Plans for calendar years 2014 through 2016.
Risk adjustment is a permanent program; States that establish an Exchange may operate risk adjustment; if a State does not operate or is not approved to operate risk adjustment, HHS will operate the program on the State's behalf.
States that intend to use reinsurance or risk adjustment parameters different from the annual HHS notice must publish a State notice of benefit and payment parameters by March 1 of the calendar year preceding the benefit year; failure to publish requires adherence to HHS parameters.
Reinsurance payments are payable on all covered benefits and are calculated on an incurred basis for the applicable benefit year.
Risk adjustment excludes Medicare Advantage, Medicare Part D, and contracts with State Medicaid agencies; plans consisting solely of excepted benefits are excluded from risk adjustment.
States that operate risk adjustment must publish the risk adjustment methodology and data validation standards in their State notice of benefit and payment parameters.
HHS will provide annual notice of benefit and payment parameters and working sessions to assist issuers and States with timelines and operational details.
inv-02: State reinsurance program publication, collection, and payment criteria
State variation and publication requirements for reinsurance program parameters and operation.
If a State elects to establish a reinsurance program and intends to modify Federal parameters, the State must publish the modified parameters in its State notice of benefit and payment parameters and apply them uniformly throughout the State.
A State that elects to collect reinsurance contributions from the fully insured market must announce this intent and specify data requirements in its State notice of benefit and payment parameters and must notify HHS by the specified deadlines.
HHS will set a national contribution rate in the annual HHS notice of benefit and payment parameters and will collect contributions from the self-insured market; States may collect additional amounts for administrative expenses or additional reinsurance payments per the rules.
Reinsurance payments are calculated as a percentage (coinsurance rate) of costs above an attachment point and below a reinsurance cap; States may vary attachment point, cap, or coinsurance rate but must ensure contributions are sufficient to meet obligations and must publish any modifications.
inv-03: Reinsurance and Risk Adjustment Criteria
Reinsurance payment calculation and State flexibility criteria.
Reinsurance payments apply to total incurred claims costs above an attachment point and below a reinsurance cap; the payment equals the coinsurance rate multiplied by the claims costs between the attachment point and the cap.
States may alter the attachment point, reinsurance cap (including eliminate the cap), and coinsurance rate; modifications must be published and be reasonably calculated to ensure contributions cover obligations for the benefit year.
States must ensure applicable reinsurance entities do not make payments exceeding contributions received to date; if projected payments exceed contributions, payments may be reduced pro rata in a fair and equitable manner among issuers.
Claims costs used for reinsurance calculations are measured on an incurred basis.
States must maintain reinsurance program books, records, and accounting evidence for at least ten years.
inv-04: Risk adjustment, data, reinsurance, and risk corridors criteria
Risk adjustment program operational criteria and State options.
HHS will publish a Federally certified risk adjustment methodology annually; States must specify which Federally certified methodology they will use or may submit an alternate methodology for HHS certification.
States submitting alternate risk adjustment methodologies must provide a rationale and specified descriptive information and must obtain recertification when changes or recalibration occur.
When HHS operates risk adjustment on behalf of a State, HHS will use a distributed data collection approach; States operating risk adjustment may choose their data collection approach but must collect or calculate at minimum individual risk scores and comply with privacy/security standards.
States must limit collected data to information reasonably necessary for risk adjustment and must implement privacy and security safeguards consistent with HIPAA Security Rule standards; personally identifiable information used as unique identifiers must be masked or encrypted except for validation.
inv-05: Data submission and attribution criteria
Requirements for QHP issuers to submit specified data and attribute/allocate revenue and expense items for risk corridors and risk adjustment.
QHP issuers must submit premium and allowable cost data in standard formats specified by HHS to support risk corridors calculations; reports must follow timing in the annual HHS notice of benefit and payment parameters.
Adjustments for reinsurance and risk adjustment are made to allowable costs (not premiums) and are attributed on an accrual basis to the applicable benefit year.
Each item of revenue and expense must be reasonably attributable to the QHP and reasonably allocated across the issuer's plans and business lines using GAAP-consistent methods; allocation methods must be disclosed to HHS and supporting records retained for ten years.
Issuers offering risk adjustment covered plans must submit risk adjustment data per State or HHS timetable, store data per specifications, and may require providers contractually to submit risk adjustment data to the issuer.
inv-06: Risk adjustment issuer and State requirements
Issuer obligations and State/HHS practices for administering risk adjustment.
Issuers of risk adjustment covered plans must submit risk adjustment data to the State, or to HHS on behalf of the State, according to the State/HHS timetable and format.
Issuers must store all required risk adjustment data in accordance with the risk adjustment data collection approach established by HHS or the State; when HHS operates risk adjustment a distributed approach will be used and data may remain with issuers.
Issuers must make data available for validation and retain reported risk adjustment data and supporting records for at least ten years and comply with data validation requests by State or HHS.
Issuers who owe net risk adjustment charges will be notified of those charges and must remit net charges to the State or HHS within thirty (30) days of assessment; charges include adjustments resulting from data validation.
Issuers may include contractual provisions requiring providers, suppliers, physicians, and other practitioners to submit risk adjustment data to issuers and may impose financial penalties for noncompliance where permitted.
inv-07: Coverage criteria and operational requirements
The part establishes subparts and sections that set standards and processes for program establishment, data, calculations, and issuer responsibilities.
States that establish a reinsurance program must issue an annual State notice of benefit and payment parameters specifying reinsurance parameters, data collection frequency, and any additional collections; deadline is March 1 of the calendar year preceding the applicable benefit year.
If a State fails to publish the required State notice of benefit and payment parameters, it must adhere to the HHS annual notice parameters and may forgo collecting reinsurance contributions or using multiple applicable reinsurance entities.
Subparts enumerate standards: Subpart C covers State reinsurance standards (establishment, collection, calculation, disbursement, coordination); Subpart D covers State risk adjustment standards (administration, methodology certification, data collection, validation); Subpart F covers issuer risk corridors standards; Subpart G covers issuer risk adjustment requirements and compliance.
Key operational terms are defined, including attachment point, reinsurance cap, coinsurance rate, contribution rate, contributing entity, reinsurance-eligible plan, risk adjustment model/methodology, risk adjustment data and collection approach.
inv-08: Operational Criteria for Reinsurance and Risk Adjustment
Operational criteria and requirements extracted from the document portions provided.
States must publish an annual State notice of benefit and payment parameters specifying reinsurance and risk adjustment parameters, data requirements, data validation standards, and any modifications to HHS parameters; the deadline for required States is March 1.
If a State establishes a reinsurance program it may elect to collect contributions, collect additional contributions, use multiple reinsurance entities, and modify payment parameters; the State must notify HHS of certain elections by specified deadlines and must apply modified parameters uniformly statewide.
Contributing entities must make reinsurance contributions at the national rate (and any State additional rate) for enrollees residing in the State; Federal collections are submitted quarterly beginning January 15, 2014; data to substantiate contributions must be submitted as required.
HHS will distribute collected funds to applicable reinsurance entities and allocate contributions among reinsurance payments, Treasury payments, and administrative expenses as specified in the annual HHS notice; contributions allocated for a purpose must be used only for that purpose.
inv-09: Operational criteria for financial programs
Operational criteria for reinsurance, risk corridors, attribution/allocation, data submission, and risk adjustment.
Contributing entities must make reinsurance contributions at the national contribution rate (and any State additional rate) for enrollees residing in the State; plans consisting solely of excepted benefits are excluded from contributions.
Reinsurance contributions to HHS are submitted on a quarterly basis beginning January 15, 2014; if a State elects to collect, it may set its own collection frequency consistent with notice requirements.
Issuers of reinsurance-eligible plans may request reinsurance payments when an enrollee meets criteria in the annual HHS or State notice; requests must follow the manner and deadlines specified in those notices.
Risk corridors payments and remittances are determined by comparing QHP allowable costs to the target amount with specified sharing for ranges (<92%, 92–97%, 97–103%, 103–108%, >108%) as described in the annual HHS notice and this subpart.
Definitions, Codes, and Key Numeric Parameters
Abbreviations referencedmixed
MLR
Medical Loss Ratio (abbreviation used in document)
QHP
Qualified Health Plan (abbreviation used in document)
Reinsurance payment formula elementsmixed
Reinsurance payments based on costs above attachment point and below reinsurance cap; payment percent (coinsurance) applies
Risk corridors definitionsmixed
Definitions and formulas for risk corridors including premiums earned, allowable administrative costs (capped at 20% of premiums earned), allowable costs, and target amount as used for risk corridors calculations.
N/Amixed
No specific procedure or diagnosis codes present in this excerpt.
Referenced industry classification codesmixed
NAICS 524114
Direct Health and Medical Insurance Carriers (used to classify impacted entities)
NAICS 621491
HMO Medical Centers (alternative classification referenced)
Data submissions for risk corridorsmixed
Premiums earned, allowable costs, and allowable administrative costs data required to be submitted to HHS per annual notice of benefit and payment parameters
inv-16: Reinsurance payment applicability
ApplicabilityReinsurance payments are payable on all covered benefits and are calculated on an incurred basis for the applicable benefit year.
ScopeApplies to claims costs for enrollees in reinsurance-eligible plans (non-grandfathered individual market plans); States may operate program or HHS will operate on State's behalf.
Definitions referencedAttachment point, coinsurance rate, reinsurance cap, and reinsurance contribution enrollee are defined in the rule and govern payment eligibility and contributions.
inv-17: Program timeframe
Benefit years
Actionable Requirements for Issuers, Providers, and Contributors
Note
State notice requirements and consequences
States establishing a reinsurance program must publish an annual State notice of benefit and payment parameters describing any State-specific reinsurance or risk adjustment parameters that differ from the annual HHS notice. The notice must be published by March 1 of the calendar year prior to the applicable benefit year. If a State fails to publish the required notice by this deadline, the State must: adhere to the HHS data requirements and data collection frequency for reinsurance payments; forgo collection of reinsurance contributions under §153.220(a); forgo collection of additional reinsurance contributions under §153.220(g); adhere to the reinsurance parameters specified in the annual HHS notice; and forgo the use of more than one applicable reinsurance entity.
State notice deadline: March 1 prior to benefit year
If notice not published: must follow HHS parameters and forgo State collections/alternatives
Methodology componentsRisk adjustment methodology includes the risk adjustment model, calculation of plan average actuarial risk, calculation of payments and charges, risk adjustment data collection approach, and program schedule.
Individual risk scoreRisk adjustment model calculates individual risk scores used to derive plan average actuarial risk.
State alternatesStates may submit alternate methodologies for HHS certification; HHS will publish Federally certified methodologies annually.
inv-40: benefit year / reinsurance attachment
DefinitionBenefit year is defined as the calendar year (cross-referenced to Exchange Establishment rule).
Reinsurance attachment
Policy Summary
PayerBlue Cross Blue Shield - Oklahoma
PolicyStandards Related to Reinsurance; Risk Corridors and Risk Adjustment (Final rule)
Policy CodePolicy N/A
Change TypeMultiple substantive additions and clarifications
Effective DateMay 22, 2012
Next Review DateN/A
Key ActionContributing entities must submit reinsurance contributions quarterly beginning January 15, 2014.
Unused reinsurance funds collected for benefit years 2014–2016 must be used for the reinsurance program until expended or by December 31, 2018, and may not be used for separate State programs thereafter.
States or HHS must validate a statistically valid sample of issuers and may adjust plan average actuarial risk and payments/charges based on validation results; annual validation for all issuers is the minimum standard.
Risk corridors definitions and calculations align with MLR concepts; allowable administrative costs are referenced and capped at 20 percent of premiums earned for purposes of risk corridors.
Risk corridors calculations are performed at the plan (QHP) level as required by statute; aggregation to issuer level is not adopted.
Reinsurance payments are available when an enrollee's covered claims exceed the attachment point; payment equals the coinsurance rate times claims between attachment point and cap; States may modify attachment point, cap, or coinsurance but must publish modifications and apply them uniformly.
Applicable reinsurance entities must not make payments exceeding contributions received; if projected payments exceed contributions, payments may be required to be proportionally reduced; entities must pay upon receipt of valid claim per requirements.
States must maintain reinsurance program accounting records for at least ten years.
States electing to operate risk adjustment must collect or calculate individual risk scores, limit PII collection to what is reasonably necessary, mask or encrypt PII used as unique identifiers except for validation, and implement security standards consistent with 45 CFR 164.308/310/312.
States or HHS must validate a statistically valid sample of risk adjustment data for issuers; adjustments to plan average actuarial risk and payments/charges may result from validation or software errors; an administrative appeals process must be provided.
State requests for alternate risk adjustment methodologies must include specified elements (model description, calibration methodology and frequency, statistical performance metrics) and demonstrate clinical meaningfulness, data quality, understandability, stability, and low administrative cost; recalibration requires HHS certification.
QHP issuers must submit premiums earned, allowable costs, and allowable administrative costs data to HHS per the annual notice; allowable costs are adjusted for risk adjustment and reinsurance payments/contributions and cost-sharing reduction payments as specified.
Revenue and expense items must be reasonably attributable to and allocated across QHPs using GAAP-consistent methods; allocation methods must be disclosed to HHS and supporting records retained for ten years.
Issuers must submit or make accessible required risk adjustment data per State or HHS approach, store data accordingly, comply with data validation requests, retain supporting information for at least ten years, and remit net charges within thirty (30) days of notification.
Issuer contracts may require providers and contractors to submit complete and accurate risk adjustment data and may include financial penalties for noncompliance where permitted.
Issuers and applicable entities must maintain data and supporting information used for attribution and allocation and to support risk adjustment data validation for ten years and make available to HHS upon request.
Transitional reinsurance program payments and contributions generally apply to benefit years 2014–2016.
Finalization deadline for payment activitiesAny remaining reinsurance payment activities for those benefit years must be completed by December 31, 2018.
State notice timingStates must publish a State notice of benefit and payment parameters by March 1 preceding a benefit year if they modify HHS parameters.
inv-18: Claims measurement basis
Measurement basisClaims costs used for reinsurance payment calculations are measured on an incurred basis (costs incurred in the benefit year).
InclusionsReinsurance payments apply to claims costs for all covered benefits as defined in the benefit year.
Policy cross-referenceThis incurred-basis measurement is reflected in the definitions moved to subpart A and in the calculation sections for reinsurance payments.
inv-19: Allowable administrative cost cap
Cap valueAllowable administrative costs are capped at 20 percent of premiums earned for purposes of risk corridors calculations.
Definition sourceAdministrative costs referenced to non-claims costs as described in 45 CFR 158.160(b) and aligned with MLR concepts.
Use in calculationsThe cap is applied when deriving the target amount (premiums earned reduced by allowable administrative costs) for risk corridors.
inv-20: Risk corridors thresholds
Payment tiersRisk corridors payments/remittances are determined by allowable costs relative to the target amount across tiers: <92%, 92–97%, 97–103%, 103–108%, and >108%.
Upper-side sharingIf allowable costs are >103% but ≤108% of target, HHS pays 50% of the amount above 103%; if >108%, HHS pays 2.5% of target plus 80% of amount above 108%.
Lower-side chargesIf allowable costs are <97% but ≥92% of target, issuer remits 50% of difference between 97% and actual; if <92%, remit 2.5% of target plus 80% of difference between 92% and actual.
inv-21: Record retention period
Retention periodIssuers and States must retain risk adjustment and reinsurance program records, supporting allocation/attribution records, and data used for validation for at least 10 years.
AvailabilityRecords must be made available to HHS or the State upon request for validation or audit purposes.
Consistency rationaleTen-year retention aligns with other federal record retention standards and supports data validation credibility.
inv-22: Reinsurance attachment point / reinsurance cap
Attachment pointAttachment point: threshold dollar amount for an enrollee's claims costs in a benefit year above which claims are eligible for reinsurance payments.
Reinsurance capReinsurance cap: dollar threshold beyond which claims costs are no longer eligible for reinsurance payments.
Payment formulaReinsurance payment equals the coinsurance rate multiplied by the issuer's claims costs between the attachment point and the reinsurance cap; States may modify these parameters but must apply them uniformly and ensure sufficient contributions.
inv-23: Reinsurance payment thresholds
Parameters published annuallyAttachment point, reinsurance cap, and coinsurance rate are specified in the annual HHS notice of benefit and payment parameters (or State notice if State-modified).
State modification authorityStates that establish a reinsurance program may increase, decrease, or eliminate the reinsurance cap, and may change attachment point or coinsurance rate, but must publish modifications in the State notice and ensure contributions cover payments.
Payment calculationWhen a reinsurance-eligible enrollee's claims exceed the attachment point but are below the cap, payment equals coinsurance rate × claims between attachment and cap.
Threshold rangesRisk corridors payment/remittance thresholds use the following ranges relative to target amount: less than 92%, 92–97%, 97–103%, 103–108%, and greater than 108%.
Specified sharesFor 103–108%: HHS pays 50% of excess above 103%; for >108%: HHS pays 2.5% of target plus 80% of excess above 108%; symmetric sharing applies for ranges below target (50% and 80% with 2.5% floor/ceiling).
Timing guidanceHHS will provide reporting and payment timing details in the annual notice of benefit and payment parameters; proposed practice suggested 30-day remittance/payment windows for issuer and HHS actions.
Issuers may contractually require providers, suppliers, physicians, and other practitioners to submit complete and accurate risk adjustment data to the issuer in the manner and timeframe established by the State or HHS on behalf of the State. Such contractual provisions may include financial penalties for failure to submit complete, timely, or accurate data.
Contractual data submission may be required by issuer contracts
Submissions must follow State or HHS-established manner and timeframe
Billing Rule
Remittance of assessed charges
Issuers that are assessed a net balance of risk adjustment charges (including adjustments from data validation) will be notified by the State or HHS on behalf of the State and must remit those net charges to the State, or to HHS on behalf of the State, within 30 days of notification.
Net charges include adjustments made pursuant to §153.350(c)
Remittance deadline: within 30 days of notification
Reinsurance payments apply to claims incurred during the benefit year and are measured on an incurred basis for that benefit year.
Attribution ruleReinsurance and risk adjustment payments/charges are attributed to the benefit year to which they apply (accrual basis), not year of submission.
inv-41: risk adjustment covered plan
Covered plansRisk adjustment covered plan: health insurance coverage offered in the individual or small group market, excluding grandfathered plans, certain group and individual plans listed in cited subchapter sections, and any plan designated otherwise in the annual HHS notice.
Scope exclusionsExcludes Medicare Advantage, Medicare Part D, contracts with State Medicaid agencies, and excepted-benefit plans as specified.
ApplicabilityApplies to non-grandfathered plans inside and outside the Exchange as described in the definitions and subparts.
inv-43: applicable reinsurance entity
DefinitionApplicable reinsurance entity: a not-for-profit, tax-exempt organization (IRC tax-exempt) that carries out reinsurance functions on behalf of a State; an entity carrying out functions for HHS is not an applicable reinsurance entity for the State.
ContractingStates may contract with or establish applicable reinsurance entities and may use more than one entity with distinct geographic jurisdictions covering the State's individual market.
OversightStates must ensure applicable reinsurance entities comply with reinsurance program requirements and recordkeeping.
inv-43: reinsurance payment parameters
ParametersReinsurance payment parameters comprise the attachment point, reinsurance cap, and coinsurance rate used to calculate payment amounts for claims between attachment and cap.
Annual publicationHHS will publish default values for these parameters in the annual notice of benefit and payment parameters; States may vary them with uniform statewide application and publication in a State notice.
Payment computationPayment amount equals the coinsurance rate multiplied by eligible claims between attachment point and reinsurance cap.
inv-44: claims costs measured on an incurred basis for reinsurance calculations
Incurred basis definitionClaims costs measured on an incurred basis means using costs incurred in the benefit year (rather than paid date) for purposes of reinsurance payment calculations.
ApplicationThis measurement basis is specified in the definitions and the calculation sections governing reinsurance payments.
RationaleAdopted for administrative simplicity and to align payments with the benefit year when costs were incurred.
Federal baselineFederally certified risk adjustment methodology: HHS will develop and publish a baseline methodology (Federally certified) to be used by States or by HHS on behalf of States.
State alternatesStates may submit alternate methodologies for HHS certification; certified methodologies will be published in the annual HHS notice.
Notice contentNotices will include the model description, factors/weights, calculation of plan average actuarial risk, payments/charges methodology, data collection approach, and schedule.
inv-46: premiums earned
Definition of premiums earnedPremiums earned: monies paid by or for enrollees with respect to a QHP as a condition of receiving coverage; determined consistent with the MLR rule.
ReferenceThis defined term cross-references the equivalent concept in the MLR rule (45 CFR subchapter) to ensure consistency in calculations.
UsePremiums earned is the starting point for computing target amount and allowable administrative costs in risk corridors calculations.
inv-47: allowable administrative costs
Cap on administrative costsAllowable administrative costs are administrative costs of the QHP capped at 20 percent of premiums earned for that QHP.
Definition linkageAdministrative costs are total non-claims costs as described in 45 CFR 158.160(b); allowable administrative costs apply the 20% cap to that definition.
Role in risk corridorsThe capped allowable administrative costs reduce premiums earned to derive the target amount used in risk corridors calculations.
inv-48: target amount
Target amount calculationTarget amount equals total premiums earned for the QHP (including any premium tax credit) reduced by allowable administrative costs (capped at 20% of premiums earned).
UsageTarget amount is the denominator against which allowable costs are compared to determine risk corridors payments or charges.
Consistency noteDefinitions and calculations are aligned with MLR concepts where practicable to minimize reporting burden.
Allowable costs compositionAllowable costs equal incurred claims (per the MLR definition) plus expenditures for quality improvement and health IT, and adjustments described in §153.530(b).
MLR alignmentThe definition references MLR incurred claims and includes QI and HIT expenditures to maintain consistency with MLR calculations.
After‑the‑fact adjustmentsAllowable costs include after-the-fact adjustments for reinsurance and risk adjustment amounts as specified in the rule.
inv-50: premiums earned
Premiums earned (definition)Premiums earned means all monies paid by or for enrollees with respect to a QHP as a condition of receiving coverage, consistent with the MLR rule's definition.
InclusionIncludes fees or other contributions by or for enrollees and is used as the basis for calculating the target amount and allowable administrative cost cap.
ReferenceDefinition intended to ensure consistency between risk corridors reporting and MLR reporting conventions.
inv-51: attribution of reinsurance/risk adjustment
Attribution basisReinsurance and risk adjustment payments and charges are attributed to the benefit year to which they apply on an accrual basis (not the year of claim submission).
Run-out and accrualThis accrual treatment aligns attribution with MLR approaches and clarifies run-out treatment for payments and charges.
ImplicationPayments and charges are recorded in the benefit year they relate to for risk corridors and reinsurance calculations, affecting issuer reporting and reconciliations.
inv-52: risk adjustment data
Data inclusionsRisk adjustment data means all data used in the risk adjustment model, calculation of plan average actuarial risk, calculation of payments and charges, or used for validation/audit.
Data collection approachRisk adjustment data collection approach specifies how data are stored, collected, accessed, transmitted, validated, and the applicable timeframes, formats, and privacy/security standards.
State/HHS rolesWhen HHS operates risk adjustment it will use a distributed approach; States operating risk adjustment may choose their own approach but must meet validation and privacy standards.
inv-53: risk adjustment methodology
Methodology contentsRisk adjustment methodology includes the model, plan average actuarial risk calculation, calculation of payments/charges, data collection approach, and program schedule.
Publication and certificationHHS will publish Federally certified methodologies in the annual notice; States may submit alternates for certification with required documentation.
Operational effectMethodology determines individual risk score computation, plan average risk derivation, and the timing of payments/charges and validation activities.
inv-54: Alternate risk adjustment methodology
Alternate methodology definitionAlternate risk adjustment methodology: a State-proposed methodology submitted to HHS for use instead of a Federally certified methodology; requires HHS certification.
Submission requirementsState submissions must include model description, calibration methodology, performance metrics, and rationale demonstrating clinical meaningfulness and feasibility.
RecertificationChanges or recalibrations to an alternate methodology require recertification by HHS.
inv-55: Applicable reinsurance entity
Entity typeApplicable reinsurance entity: a not-for-profit organization exempt from taxation under the Internal Revenue Code that performs reinsurance functions on behalf of a State.
Scope limitationAn entity is not an applicable reinsurance entity to the extent it carries out reinsurance functions on behalf of HHS rather than the State.
State oversightStates must ensure applicable reinsurance entities comply with the subpart and maintain required records and accounting for benefit years.
Per‑enrollee rateContribution rate (reinsurance contribution per enrollee): a per capita amount each contributing entity must pay for each enrollee residing in the State for the benefit year.
Contributing entitiesContributing entities include health insurance issuers and third-party administrators on behalf of self-insured group health plans as specified in §153.400.
Payment frequencyFederal contributions are submitted quarterly beginning January 15, 2014 unless the State elects to collect from fully insured plans.
inv-57: Risk adjustment covered plan
Definition summaryRisk adjustment covered plan: health insurance coverage offered in the individual or small group market subject to the risk adjustment program, excluding grandfathered plans and other specified exceptions and any plan excluded by the annual HHS notice.
Market scopeIncludes plans both inside and outside the Exchange, and applies to non-grandfathered plans in the specified markets.
ExclusionsExcludes Medicare Advantage, Medicare Part D, Medicaid contracts, and excepted-benefit plans as described in the rule and notices.
inv-58: Risk adjustment covered plan (alternate entry)
Restated definitionRisk adjustment covered plan: any health insurance coverage offered in the individual or small group market subject to the risk adjustment program, with specified exceptions and any plan determined not to be a covered plan in the annual HHS notice.
PurposeDefines the universe of plans whose payments/charges and data are subject to the risk adjustment program.
ReferenceSee annual HHS notice for any additional plans excluded from coverage.
inv-59: Risk adjustment data (alternate entry)
Included dataRisk adjustment data comprises all data used in the model, plan average actuarial risk calculation, payments/charges calculation, and validation/audit of such data.
Collection approachThe risk adjustment data collection approach specifies storage, access, transmission, validation, timeframes, formats, and privacy/security standards.
Distributed approach noteWhen HHS operates risk adjustment it will use a distributed data approach so individual data may remain with issuers; States may choose alternative approaches.
Methodology elementsRisk adjustment methodology consists of the risk adjustment model, plan average actuarial risk calculation, payments/charges calculation, data collection approach, and program schedule.
Operational impactThese elements determine how individual risk scores are produced, aggregated to plan-level risk, and used to compute transfers between plans.
PublicationFederally certified methodologies will be published annually by HHS in the notice of benefit and payment parameters; States may use or seek certification for alternates.
Inventory referenceAllowable administrative costs are administrative costs capped at 20% of premiums earned (definition in §153.500).
RoleUsed to compute the target amount for risk corridors (premiums earned minus capped allowable administrative costs).
ConsistencyAligned with MLR concepts to reduce reporting burden and ensure comparable metrics.
inv-62: Allowable costs
ComponentsAllowable costs include incurred claims (per MLR), quality improvement expenditures, health information technology expenditures, and specified adjustments per §153.530(b).
AlignmentDefinitions reference MLR incurred claims to maintain consistency across regulatory calculations.
Use in risk corridorsAllowable costs are compared to the target amount to determine payments or remittances under risk corridors.
inv-63: Target amount
Target amount definitionTarget amount equals total premiums earned reduced by allowable administrative costs (capped at 20% of premiums earned).
FunctionUsed as the denominator in risk corridors to compare allowable costs and determine payment/remittance tiers.