Setting the Record Straight: Privacy and Risk Adjustment

The creation of a risk adjustment program is a vital part of the Affordable Care Act. It lessens the incentive for insurance companies to enroll only healthy people by helping insurers cover the costs of people with high health care needs. According to Steve Larsen, director of the Center for Consumer Information and Insurance Oversight,

Risk adjustment ensures that health insurance plans have additional money to provide services to the people who need them most by providing more funds to plans that provide care to people that are likely to have high health costs. Insurance plans then compete on the basis of quality and service, and not on the basis of whether they can attract healthy people.

With a working risk adjustment system, insurers will no longer compete to attract only the healthiest among us. Instead, they will compete on benefits, provider networks, and quality care. This competition will lead to better coverage options, allowing consumers to select a plan that best works for them. With risk adjustment, insurance companies can continue to thrive even when they cover people who have high health care costs.

Several state Medicaid programs and Medicare already use risk adjustment. And to determine each enrollee’s potential for high costs, the programs collect information about medical conditions that helps the risk adjustment program to be successful.

Some Members of Congress are using this data-collecting process to try to throw Americans into a panic about violations of privacy. Representative Denny Rehberg, chairman of the House Appropriations Labor-HHS Subcommittee sent a letter to Secretary Sebelius, claiming that this is an “egregious violation of the privacy rights that the American public rightfully demands.”

In response, National Association of Insurance Commissioners (NAIC) Consumer Advocate Tim Jost emailed the Politico Pulse column, criticizing Rehberg’s attack. Jost wrote, “Rehberg needs to be called [out] for what he is doing here … Trying to protect insurers from oversight.” The real issue, Jost explained, is whether the government will collect the data necessary to perform risk adjustment, or if they’ll simply let insurers compute their own risk scores without any oversight. The latter could result in abuses of the system because insurers would be able to post scores without providing any data to back it up. This means that insurers themselves would be responsible for estimating how much they expect to spend on care for sicker people and how much money they would either get or give under a risk adjustment system.

No matter what opponents say, there’s no threat to Americans’ private information. The Centers for Medicare and Medicaid Services (CMS) assures that consumers’ privacy will be preserved. The agency recently released a proposed rule for collecting information, and it states that information will not include personal data such as name, Social Security number, or address. CMS assures consumers that private information will indeed remain private, saying, “CMS will not require states to collect your medical record or information that identifies your doctor; nor would the Federal government collect this information.”

In fact, only the data required to calculate the potential of high costs based on medical conditions will be collected. And it’s important to remember that the data that are collected goes to a good cause—risk adjustment improves the quality of health care for all Americans, ensuring that we can all choose the best plan.