Kaiser Permanente Issues Public Comment on Centers for Medicare & Medicaid Services Proposed Rule

WASHINGTON, July 16 -- Anthony Barrueta, senior vice president for government relations at Kaiser Permanente, Oakland, California, has issued a public comment on the Centers for Medicare and Medicaid Services' proposed rule entitled "Amendments to the Health and Human Services-operated Risk Adjustment Data Validation under the Patient Protection and Affordable Care Act's Health and Human Services-operated Risk Adjustment Program". The comment was written on July 2, 2020, and posted on July 13, 2020:

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Kaiser Permanente appreciates the opportunity to provide comments to the Department of Health and Human Services ("HHS") Centers for Medicare and Medicaid Services ("CMS") in response to the Notice of Proposed Rulemaking, Amendments to the HHS-Operated Risk Adjustment Data Validation Under the Patient Protection and Affordable Care Act's HHS-Operated Risk Adjustment Program (the "NPRM")./1

Kaiser Permanente is the largest private integrated health care delivery system in the United States, delivering health care to over 12 million members in eight states and the District of Columbia./2

The Affordable Care Act ("ACA") fundamentally changed the health care insurance landscape, in part by prohibiting insurers from denying coverage or charging higher premiums based on preexisting conditions. The ACA's stabilization programs - the permanent risk adjustment program, the temporary reinsurance program, and the temporary risk corridors program - enabled issuers to participate by offering meaningful protection from the impacts of worse than expected relative or overall population risk.

As the only remaining ACA stabilization program, a successful risk adjustment program is essential to a well-functioning market that is generally free of medical underwriting. It spreads financial risk across the markets by transferring funds from plans with lower-risk enrollees to plans with higher-risk enrollees. The ACA risk adjustment program is enormous in scale, shifting $10.4 billion across 572 issuers in 2018. Since the outset of the ACA's risk adjustment system, Kaiser Permanente's members have financed more than $2 billion in risk adjustment transfers to members enrolled by other carriers.

The ACA Risk Adjustment Data Validation ("RADV") process validates the accuracy of data submitted by carriers for purposes of risk adjustment transfer calculations. ACA RADV has uncovered significant error rates in submissions; for 2017, the national average failure rate was approximately 16 percent. Given the significant risk adjustment dollar transfers among carriers and high audit error rates, ACA RADV plays a critical role in promoting risk adjustment transfers that more accurately reflect true differences in population risk across carriers in the same markets. Kaiser Permanente strongly believes that ACA RADV should be applicable to any year in which ACA risk adjustment transfers are made.

Kaiser Permanente appreciates CMS' continued commitment to improving the ACA risk adjustment program and refining the associated RADV process and methodology. Here, CMS is proposing changes to the error rate calculation process and the timing of the application of RADV results with the stated goals of furthering the integrity of the RADV program while promoting fairness and improving predictability for issuers. Kaiser Permanente supports improved program integrity, including changes that ensure transfers reflect true differences in population risk.

Kaiser Permanente's specific recommendations for changes to the NPRM are as follows:

Error Rate Calculation Methodology

CMS proposes three changes to the error rate calculation starting with the 2019 benefit year: (1) modifying the HCC grouping methodology used in the error rate calculation; (2) changing the error rate calculation in cases where an outlier issuer is only slightly outside the confidence interval for one or more HCC groups; and (3) modifying the error rate calculation in cases where a negative error rate outlier issuer has a negative failure rate.

Kaiser Permanente is generally supportive of changes that could improve efficiency and accuracy within the RADV process, including the proposal to combine certain HCCs with the same risk score coefficient into groups prior to determining failure rates. We also support the proposal to constrain negative outlier issuers' error rate calculations in cases when an issuer's failure rate is negative.

Kaiser Permanente appreciates CMS' continued assessment of the "payment cliff" and resulting "leapfrog" effect. This occurs when an outlier issuer is only slightly outside of the confidence interval and receives a risk score adjustment even though the issuer is not significantly different from an issuer just inside of the confidence interval that receive no risk score adjustment. We consider the payment cliff effect a consequence of a policy choice to limit the number of issuers impacted by ACA RADV.

The NPRM proposes a sliding scale approach to address this payment cliff effect. Kaiser Permanente prefers the current methodology because the proposed sliding scale approach would meaningfully dampen adjustments the closer an issuer is to the confidence interval bounds.

While the change may preserve some incentive for issuers to submit accurate data because it would increase the range in which issuers can be identified as outliers, we prefer all issuers outside of the confidence intervals receive a meaningful risk score adjustment without any dampening effect.

Recommendation: Kaiser Permanente recommends maintaining current methodology for calculating adjustments for issuers outside of the confidence intervals.

If, however, CMS' decides to move forward with a sliding scale approach, Kaiser Permanente would recommend adopting the sliding scale approach as proposed. We would not support any changes to this approach such as a sliding scale with outliers starting at 95 percent confidence interval because it would further dampen adjustments to address the payment cliff effect, thereby weakening the ACA RADV process.

RADV Results Application

CMS proposes transitioning from the current prospective application of ACA RADV results to an approach that would apply results to the benefit year being audited starting with the 2021 benefit year. Kaiser Permanente supports aligning ACA RADV results to the risk adjustment results for the same year due to significant year-over-year volatility in issuers' market share.

Applying ACA RADV results to a subsequent year in which an issuer's market share has significantly increased or decreased inappropriately magnifies or diminishes the resulting transfer.

Recommendation: Kaiser Permanente supports the proposed transition from the current prospective application of ACA RADV results to an approach that would apply results to the benefit year being audited starting with the 2021 benefit year. KP does not recommended the alternative timeline of transitioning starting with the 2020 benefit year because issuers did not account for this change in 2020 pricing.

We appreciate CMS' continuing efforts to strengthen and improve ACA RADV. If you have questions or concerns, please contact Jessica Fjerstad by phone at (510) 267-7619 or by email at [email protected], or me by phone at (510) 271-6835 or by email at [email protected].

Sincerely,

Anthony Barrueta

Senior Vice President

Government Relations

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Footnotes:

1/ 85 Fed. Reg. 33595 (June 2, 2020).

2/ Kaiser Permanente comprises Kaiser Foundation Health Plan, Inc., the nation's largest not-for-profit health plan, and its health plan subsidiaries outside California and Hawaii; the not-for-profit Kaiser Foundation Hospitals, which operates 39 hospitals and over 700 other clinical facilities; and the Permanente Medical Groups, self-governed physician group practices that exclusively contract with Kaiser Foundation Health Plan and its health plan subsidiaries to meet the medical needs of Kaiser Permanente's members.

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The proposed rule can be viewed at: https://www.regulations.gov/document?D=CMS-2020-0059-0001

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