Even as health plans continually evolve to provide the best possible treatment to individuals, it is critical for insurance companies to enforce ‘risk adjustment’ as a part of their strategy. This term has often been thrown around, especially in the last few years – but what does it really mean?
By definition, ‘risk adjustment’ is a significant tool that aids insurers to provide a level-playing field to those individuals, who have significant health needs. Each individual is allotted a ‘risk score’ based on their current health status. The score is reset on January 1 every year and is calculated by the government agency that oversees the health plan an enrollee is a part of. The risk score is also referred to as the risk adjustment factor (RAF).
How is the risk score calculated?
There are several factors that are taken into consideration while calculating the risk score: age, sex, socioeconomic status, Medicaid eligibility, as well as disability, and institutional status. Apart from these parameters, the health status of an individual is also taken into account.
There may be some who have a higher risk score than others – even in such circumstances, the scales are balanced, so that coverage is provided to all, whatever their health needs may be.
Those who have high RAF scores can apply for a Medigap or Medicare Supplemental Insurance Plan to take care of additional costs, otherwise not covered by their Medicare plan.
The working of risk adjustment tools
Since insurance companies incur varying coverage costs for their enrollees, risk adjustment serves as a tool for protection – ensuring that they receive appropriate revenue, irrespective of the patient’s health needs.
Here’s how a risk adjustment program works – the funds are transferred from the insurers who have low-risk enrollees to those who have a larger pool of high-risk enrollees. In this manner, the state budget is maintained, ensuring equity for all. This also prevents any form of discrimination that may happen otherwise, because of a variation in health needs.
While states have the option to offer their own risk adjustment program; at present, it is being administered by the Department of Health and Human Services (HHS). Any transfer of payments between insurers is carried out based on a particular methodology – taking into account the average health status of enrollees. This includes any adjustments for any variations in premiums, actuarial value, the duration of the policy, as well as their location. The payments are made once a year, and the data for the funds are heavily monitored by a validation process laid down by HHS.
Is risk adjustment important?
Of course, it is an important tool for insurers and must not be ignored. In the absence of risk adjustment, insurers can charge more for the same product, if the risk score of a policyholder happens to be high. But this tool helps them establish an equal platform to receive healthcare. With risk adjustment, sick patients cannot be refused from enrolling in a policy, because insurers receive fair compensation for taking on their medical costs.
Furthermore, an insurer can utilize risk adjustment payments to reinforce a stronger relationship with their enrolled members. They can offer benefits like a subscription to an exercise program, disease management, transportation to a medical facility, and more.
Risk adjustment also ensures that medical charging and coding are done accurately.
Here's how Focus Care can help you
By now, we have already established the significance of risk adjustment tools for health plans. While there are several health vendors available today, Focus Care has over two decades of expertise in conducting, supporting, and managing health plans. They have been consistently working towards improving member and patient engagement, enhancing individual care, and increasing revenue for their clients.
With Focus Care as a reliable companion, everything from the payers’ end-to-end Medicare, Medicaid, or Dual Assessment programs is taken care of, along with outreach, scheduling, provider support, Risk Adjustment Coding, and Quality Measure capture.
Also, Focus Care’s NCQA Comprehensive Patient Assessment Tool has a set of pertinent questions that are tailored to meet CMS Standards, and is designed to help participants and providers identify chronic disease, injury risk, modifiable risk factors, and urgent health needs.
That’s not all — Focus Care has a robust national network of 11,000 providers in the country, who have registered over 40,000 interactions per year.
All in all, comprehensive healthcare and Focus Care go hand in hand!
Gregory Deranian
Gregory Deranian is Vice President of Business Development & Marketing at Focus Care, Inc, a leading national healthcare services company that partners with major health plans, ACOs, and physician offices nationwide to enhance quality of care for their Medicare, Medicaid, and ACA populations.