CurrentMedicarePolicy N/A

Request to reduce risk adjustment transfers in Alabama small group and individual markets

A letter from the Alabama Department of Insurance requesting federal approval to reduce calculated risk adjustment transfers by 50% (and related administrative cost reduction) for the Small Group and Individual insurance markets in Alabama, arguing the national program is imprecise for the state's markets and describing expected premium impact and market effects.

Policy Summary

PayerMedicare

PolicyRequest to reduce risk adjustment transfers in Alabama small group and individual markets

Policy CodePolicy N/A

Change TypeOperational request (administrative/market adjustment)

Effective DateAug 31, 2020

Next Review DateN/A

Key ActionState requests federal approval to reduce calculated risk adjustment transfers by 50% for Small Group and Individual markets and reduce administrative costs.

SourceLink

POLICY UPDATE CHANGES

No material clinical or coverage changes in this revision.

50%requested reduction in calculated risk adjustment transfers

1%de minimis premium impact threshold cited

2018-2019benefit years used for issuer data tables

2individual market issuers cited

4small group market issuers with reported experience

Policy Summary

PayerMedicare

PolicyRequest to reduce risk adjustment transfers in Alabama small group and individual markets

Policy CodePolicy N/A

Change TypeOperational request (administrative/market adjustment)

Effective DateAug 31, 2020

Next Review DateN/A

Key ActionState requests federal approval to reduce calculated risk adjustment transfers by 50% for Small Group and Individual markets and reduce administrative costs.

SourceLink

On This Page

Trek Health ingests and normalizes Transparency in Coverage data and payer policy updates to give provider organizations a clear view of how commercial reimbursement behaves across markets, payers, and services. Our platform transforms raw payer disclosures into structured intelligence that supports contract evaluation, payer negotiations, and service line strategy. By combining market benchmarks with ongoing policy visibility, Trek helps teams identify variability, risk, and opportunity in commercial reimbursement. The result is faster insight, stronger negotiating positions, and more informed financial decisions.

State Justification and Requested Flexibility

State justification and requested flexibility

State's demonstration regarding premium impact and justification for proposed flexibility:

A 50% reduction in risk adjustment transfers was approved for the 2020 plan year and rates for 2020 were developed anticipating the 50% reduction.

The impact of the 50% reduction in transfers did not result in an adjustment to any rate exceeding a de minimis level of increase (not more than 1 percent of premium).

State lacks credible long-term projection data and expects large transfers to continue flowing from small issuers to dominant issuers without modification.

Request: continue approval of the modified risk adjustment program (50% of calculated transfers) for the 2022 policy year for Small Group and Individual markets.

Data references: issuer-level tables for 2018–2019 premium, claims, and transfers (sources: SHCE (SI-ICE) and Summary Report on Permanent Risk Adjustment Transfers) were used to illustrate financial impact; Small Group includes four issuers (BCBSAL, UHCA, UHCI, VIVA) and Individual includes two issuers (BCBSAL, Bright Health).

Requested Adjustment to Risk Transfer Methodology

Prior Authorization

Request to halve calculated risk adjustment transfers (Small Group & Individual)

The Alabama Department of Insurance requests federal approval to reduce calculated risk adjustment transfers by 50% for both the Small Group and Individual markets, and to reduce related administrative costs.

Request covers Small Group and Individual markets.
Proposal includes a 50% reduction in calculated risk adjustment transfers and reduction of administrative costs.

Key Terms

inv-03: Risk adjustment transfers — calculated payments between issuers; state requests reducing transfers (low importance)

DefinitionRisk adjustment transfers are calculated payments between issuers to account for differences in enrollee risk; the State requests reducing these calculated transfers by 50% for the Small Group and Individual markets.

PurposeTo reallocate funds among issuers to compensate for enrollee risk differences so premiums reflect underlying risk rather than issuer mix.

State requestAlabama requests federal approval to reduce calculated risk adjustment transfers by one half (50%) for the Small Group and Individual markets.

Supporting dataState provided issuer-level tables for 2018–2019 (premium, claims, transfers) drawn from SHCE (SI-ICE) and the Summary Report on Permanent Risk Adjustment Transfers to illustrate financial impact.

inv-04: De minimis impact defined as impact on premium not exceeding 1 percent