To protect against potential effects of adverse selection and help stabilize premiums in the individual and small group markets, the (Robin Hood) risk adjustment program transfers funds from plans with relatively low-risk enrollees to plans with relatively high-risk enrollees.
It generally applies to non-grandfathered individual and small group plans inside and outside Exchanges.
Section 1343 of the Patient Protection and Affordable Care Act (ACA) provides for a permanent risk adjustment program.
The methodology that HHS will use when operating a risk adjustment program on behalf of a State for the 2021 benefit year 7 will calculate a plan average risk score for each covered plan based upon the relative risk of the plan’s enrollees, and apply a state payment transfer formula in order to determine risk adjustment payments and charges for plans within a State market risk pool.
The HHS risk adjustment methodology addresses three considerations:
(1) adverse selection in the individual and small group markets;
(2) plan metal level differences and permissible rating variation; and
(3) the need for risk adjustment transfers that net to zero.
25 pages; Aug. 3, 2021. “The methodology that HHS will use when operating a risk adjustment program on behalf of a State for the 2021 benefit year will calculate a plan average risk score for each covered plan based upon the relative risk of the plan’s enrollees, and apply a state payment transfer formula in order to determine risk adjustment payments and charges for plans within a State market risk pool.” [Also available: Technical Details (XLSX), and 2020 Benefit Year Risk Adjustment: SAS Version of HHS-De veloped Risk Adjustment Model Algorithm Software (ZIP)] MORE >>
Centers for Medicare & Medicaid Services [CMS], U.S. Department of Health and Human Services [HHS]
