Risk Adjustment is a system-wide method among health insurers that is intended to level the playing field and ensure that everyone has access to health insurance. The US and many European countries balance the cost of insuring high risk patients with the social concerns of adequate health care coverage for all. This Risk Adjustment method works by assessing the cost of covering high risk patients and having the insurers who have less costs contribute to a shared funding system. In the US, the Treasury does not currently have a funding role in risk adjustment.
There are several methods of measurement used for risk adjustment, including ICD-9 and 10 diagnosis codes and actual costs. Some medical conditions are short-term and high cost, such as an ER visit for an accident, others are low cost but long-term, such as chronic diabetes care. For people who have medical conditions that are long term, maybe life-long, and high cost, their health insurance provider could be negatively impacted by costs. The highest risk group for long term, high cost health care is children born with significant medical conditions including congenital disabilities.
As a country, we have enough resources to make sure everyone has health care. One of the ways we do this is through risk adjustment. There are both federal and state regulatory standards, and private insurers take their guidance from these agencies. Some of the current practices that allow for the level playing field is the pre-existing conditions inclusion and the Essential Health Benefits coverage.
Before the Affordable Care Act, people with pre-existing conditions could be turned down for health insurance. If, for example, a family moved jobs and changed insurance, an insurer could decide to not insure a child with a congenital heart defect or a parent with a history of substance abuse. At this time, the standard that says pre-existing conditions will be covered by a new health insurance plan still stands. Risk adjustment means that everyone can get coverage, and the insurance companies know that they do not have to engage in ethically questionable methods of enrolling only select healthy people in order to keep their heads above water.
Essential Health Benefits (EHB) means that insurance companies are required to offer both expensive and less expensive types of coverage. Currently, the EHB standards have not been impacted by the Trump administration's halt to subsidies. These standards mean, for example, that maternity and newborn care has to be offered, as well as mental health and substance abuse treatment, prescription drug coverage, pediatrics, and other standards. Private insurers cannot decide to only offer services that healthier people might choose, or enroll select providers, skipping specialists such as oncologists.
There are several methods insurance companies can use to improve the overall health of their clients, while establishing safety nets for clients with high risk conditions. A collaborative relationship between network providers and medical management staff within the insurance company can use non-traditional methods to improve health care, such as case management and chronic care management by nurses. Administrative efficiency can reduce overhead. Prevention, however, remains the gold standard. The cost of prenatal vitamins and prenatal care cannot compare with the life-times costs to both an insurance company, a family, and a community, of a child born with a congenital disability. Balance assessments and chair yoga classes do not compare to the costs of falls in the frail elder. Early detection of cancer through screenings can provide measurable cost savings, compared to treatment costs of late stage diagnosis.
One method that has been very successful is in targeting chronic conditions, with an eye to preventing their progression to more significant health conditions. An example would be preventing the progression of diabetes and hypertension to end stage renal disease. ESRD care relies on expensive dialysis and kidney transplant, and can impact both families and communities significantly. A program that involves the prevention of ESRD by case management and medical management of diabetes and hypertension by nurses, using new technologies such as telemedicine and home monitoring, is going to be a very cost-effective way to keep costs down.
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