More than 21 million Americans currently rely on the Affordable Care Act (ACA) for medical coverage. But how are commercial payers compensated for care delivered to these patients? And how are these reimbursements calculated?
The answer, is using the HSS-HCC risk adjustment model – and this article explains exactly what that means.
The HHS-HCC model is a risk adjustment methodology used by the Centers for Medicare and Medicaid Services (CMS) to calculate payments for health insurers in the Affordable Care Act (ACA) marketplace. It fulfils several important roles:
The HSS-HCC model combines multiple data points to produce a risk adjustment factor (RAF) score which reflects the patient’s underlying health status and expected costs. This is used by the CMS to determine how much a health plan will be paid for covering the individual patient’s care.
The RAF score takes into account:
But in order to accurately account for patients’ health conditions, the healthcare provider must submit HCC codes aligned with the HSS-HCC model.
Hierarchical condition category (HCC) codes are an essential part of healthcare risk-adjustment. They group related diagnoses together, enabling the Centers for Medicare and Medicaid Services (CMS) to leverage historic data to estimate the cost associated with each code.
However, when the Affordable Care Act (ACA) came into force, the Department Health and Human Services (HHS) determined that a new risk adjustment model would be required to calculate reimbursements for insurance plans on the ACA.
This new model required new HHS-HCC codes, which are based in large part on the well-established CMS-HCC risk adjustment model. (For an overview of this work, check out our blog on the topic here.) But HHS-HCC coding diverges from the CMS-HCC model in a few important ways.
While Medicare Advantage serves a small set of demographics (65+ and disabled), the ACA cover all ages. This has two important implications:
There are more HHS-HCC codes: Many conditions are not represented in the CMS-HCC codes, and the HHS-HCC risk adjustment model uses more. At present, it features 127 HCC categories, with 7768 ICD-10 codes mapping to an HCC.
The cost estimations differ: For some conditions, such as neonatal complications, the sample size in the Medicare population is very low compared to the commercially insured population. The HHS-HCC codes reflect the cost patterns for adults, children, and infant subpopulations – and therefore differ substantially from those associated with Medicare Advantage patients.
The CMS-HCC risk adjustment model uses codes from the current year to determine next year’s reimbursement rates. In contrast, HHS-HCC coding is done concurrently, meaning it uses diagnoses from a period to predict costs in that same period.
This has important implications for reimbursements, as the costs associated with a particular condition offer differ greatly 12 months after diagnosis.
The two risk adjustment models differ in two important ways in terms of what providers can claim reimbursements for:
The first is drug costs: The CMS-HCCs predict exclusively non-drug medical spending (with the notable exception of Medicare Part D.) In contrast, the HHS-HCCs predict the sum of medical and drug spending.
The second is patient liability: The Affordable Care Act (ACA) splits liability for healthcare payments between the insurer and the insured individual. The percentage paid by the insurer differs depending on the category of plan:
| Plan Category | Plan Liability | Individual Liability |
| Bronze | 60% | 40% |
| Silver | 70% | 30% |
| Gold | 80% | 20% |
| Platinum | 90% | 10% |
As a result, ACA reimbursements will vary not just based on the risk associated with a particular set of HCC codes but the patient’s plan level.
Incomplete HCC coding can dramatically impact the reimbursement payers receive for insuring patients through the ACA. This places a responsibility on value-based care (VBC) providers to ensure their coding is accurate and up to date – and make sure insurers are fairly compensated:
Documentation is the foundation of HCC coding as you may be required to prove conditions were recorded in the period a claim is made. However, many providers struggle with fragmented documentation processes that lead data to either be lost or difficult to find.
Providers should take a few steps to improve their documentation:
HCC coding is vital for any provider that serves patients with ACA plans, as it ensures the insurer receives adequate and fair funding. But the coding process is time-consuming and repetitive, creating a large workload for providers – and taking their focus away from patient care.
That is why a growing number of providers are automating the vast majority of the process. Once your documentation is accurate and your data system is streamlined, you can use innovative software to ingest and analyze patient data. The software will then determine which HHS-HCC codes are relevant – and offer reliable recommendations to complete your risk adjustment workflow faster.
HCC Assistant uses natural language processing (NLP) to analyze structured and unstructured patient data and produce accurate HCC recommendations. With more accurate HCC coding, the tool helps both payors and VBC providers support better patient care:
Want to explore how HCC Assistant could improve your HHS-HCC risk adjustment workflow?
