CurrentMedicarePolicy N/A

Small Group Risk Adjustment Transfer Reductions (Alabama)

A letter from the Alabama Department of Insurance requesting a 50% reduction to federal Small Group risk adjustment transfers for Alabama, citing an extremely concentrated issuer market (~97% market share for one issuer) and using 2017 benefit year data to assess premium impacts.

Policy Summary

PayerMedicare

PolicySmall Group Risk Adjustment Transfer Reductions (Alabama)

Policy CodePolicy N/A

Change TypeOperational request to reduce calculated transfers by 50% for AL

Effective DateSep 10, 2018

Next Review DateN/A

Key ActionRequest to reduce calculated Small Group risk adjustment transfers by one half for Alabama.

SourceLink

POLICY UPDATE CHANGES

No material clinical or coverage changes in this revision.

50%proposed reduction

2017benefit year

97%single issuer market share

under 1%BCBS impact

exceeds 1%UHCI impact

Requested Operational Change and Rationale

Requested change and supporting evidence

Requested operational change and supporting rationale:

Alabama's market concentration reduces the precision of national risk adjustment transfers; the Department of Insurance requests an adjustment to the formula to more precisely reflect appropriate risk transfers.

Operational proposal: Reduce calculated Small Group risk adjustment transfers by 50% (remove one half of the calculated transfers) for the Alabama small group market.

Supporting evidence: Analysis uses 2017 benefit year tables of premium, claims, and transfers showing the impact of a 50% reduction; confidential actuarial memoranda were reviewed to assess issuer premium responses.

ALL of the following

Impact on premium

Policy Summary

PayerMedicare

PolicySmall Group Risk Adjustment Transfer Reductions (Alabama)

Policy CodePolicy N/A

Change TypeOperational request to reduce calculated transfers by 50% for AL

Effective DateSep 10, 2018

Next Review DateN/A

Key ActionRequest to reduce calculated Small Group risk adjustment transfers by one half for Alabama.

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.

Key Terms

inv-03: risk adjustment transfers — definition/compact descriptor

DefinitionRisk adjustment transfers are payments between health insurance issuers intended to redistribute funds from plans with lower‑risk enrollees to plans with higher‑risk enrollees based on the federal risk adjustment program.

Alabama market concernAlabama's extremely unbalanced market (including an issuer with ~97% market share) produces imprecise national risk adjustment transfer results in the State.

Requested operational changeThe Alabama Department of Insurance requests removing one half (50%) of the calculated Small Group risk adjustment transfers for Alabama to provide additional market stability.

Rationale for changeA 50% reduction is proposed because the current transfer calculations are viewed as imprecise in Alabama and reducing transfers would roughly approximate the impact shown in Tables comparing 2017 benefit year data.

Data basisAnalysis and tables use 2017 benefit year premium, claims, and transfer data for the remaining four Small Group issuers; supplemental confidential issuer data informed the assessment.

OpenPayer

Small Group Risk Adjustment Transfer Reductions (Alabama)

Requested Operational Change and Rationale

Requested Provider/Operational Action

Key Terms