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Health Care Cost Trends Request for Proposals – Examining the Relative Effectiveness of Highly Complex Risk Adjustment Models in the Health Insurance Marketplace

Background and Purpose

The Society of Actuaries (“SOA”) Research Institute is the research arm of the SOA, providing objective, data-driven research that brings together tried and true practices and future-focused approaches to address societal challenges and business needs. The Institute provides trusted knowledge, extensive experience and new technologies to help effectively identify, predict and manage risks.

Risk adjustment has been an important actuarial tool in healthcare. It has been used to help manage risk selection of insurers by attempting to tie revenue more closely to the risk profile of members. Over the years, Risk Adjustment has been increasing in complexity. Payers such as State Governments and CMS are constantly trying to upgrade the risk adjustment mechanism by including more diagnoses and tweaking how revenues are impacted in order to hopefully come up with a fairer redistribution of revenue to make higher risk insurers whole.

Over time, the following changes have been observed with regards to risk adjustment:

  • Increased complexity results in greater costs to insurers and payers
  • There has been an increase in insurers focusing resources on maximizing revenue rather than on controlling costs
    • This includes more aggressive coding of claims targeted to optimize diagnosis codes
    • More prevalent in Medicare Advantage, where risk adjustment is not a zero sum game
  • Risk adjusters need to keep up with new emerging medical diagnoses and drug classes
  • Risk Score accuracy at the individual level may or may not reflect the overall risk for the population
  • Risk Scores too closely tied to claims costs can remove incentives to manage care
  • Differences in Provider networks result in member selection and distorted risk scores
  • Inclusion of Social Determinants of Health can result in revenues flowing out of low income areas where needs are great.

Research Objective

The Health Care Cost Trends Strategic Research Committee is looking for a risk adjustment proposal that will examine the current risk adjustment landscape in the US and globally and the effect of increased complexity on risk adjustment accuracy. The proposed research could do any of the following:

  • Calculate the effectiveness of recent changes to risk adjustment parameters and methodology on predicting insurer claims costs
  • Explore how differences in risk adjustment methodology impact the accuracy, fairness, and effectiveness of its intended goals. This could include:
    • Exploring differences in methodologies used by different payer systems, such as
      • Medicare Advantage
      • Individual ACA Exchanges
      • Medicaid Managed Care
      • Non – US health insurance marketplaces
  • Evaluate the predictive effectiveness of different models when aggregated from an individual level to a group level by theoretical health plans

Note that the list above is not meant to be exhaustive but merely examples of proposed topics that may be researched.

Letter of Intent

Parties that wish to participate must submit a brief Letter of Intent (LOI) providing the following information:

  1. List the topic addressed in the research.
  2. The proposed title of the report and purpose of the research.
  3. Literature review of prior research (both actuarial and non-actuarial work) and its findings.
  4. A description of the research project (data and specific methods) and how it might be used by practicing health actuaries now or in the future.
  5. A description of the expected deliverables, tools or other resources
  6. A rough estimate of the funding requirements, the ability of the applicant(s) to access any data needed.
  7. The qualifications (including any actuarial designations and any relevant experience in industry) of the applicant(s)
  8. A timeframe for completion of the research.
  9. LOIs will be no more than 2 pages, with no less than 1-inch margins, no less than 11- point font, and no less than a space and a half. Quality of writing in the LOI will be a decision factor.

Letters should be submitted to Research-HCCT@soa.org, by the end of the day on January 31, 2025. Decisions on whether an applicant will be invited to submit a full proposal based on the LOI will be communicated by February 28, 2025.

Full Proposal Requirements

Parties who are invited to submit a full proposal would then provide the following information:

  1. Resumes of the researcher(s), including any graduate student(s) expected to participate, indicating how their background, education and experience bear on their qualifications to undertake the research. If more than one researcher is involved, a single individual should be designated as the lead researcher and primary contact. The person submitting the proposal must be authorized to speak on behalf of all the researchers as well as for the firm or institution on whose behalf the proposal is submitted.
  2. An outline of the approach to be used (e.g., literature search, model, etc.), emphasizing issues that require special consideration. Details should be given regarding the techniques to be used, collateral material to be consulted, and possible limitations of the analysis.
  3. A description of the expected deliverables and any supporting data, tools or other resources.
  4. Cost estimates for the research, including computer time, salaries, report preparation, material costs, etc. Such estimates can be in the form of hourly rates, but in such cases, time estimates should also be included. Any guarantees as to total cost should be given and will be considered in the evaluation of the proposal. While cost will be a factor in the evaluation of the proposal, it will not necessarily be the decisive factor.
    As a guide for developing the project budget, please review the Historical Project Cost Guide (see Appendix)
  5. A schedule for completion of the research, identifying key dates or time frames for research completion and report submissions. The Health Care Cost Trends (HCCT) Strategic Research Committee is interested in completing this project in a timely manner.
  6. Suggestions in the proposal for ensuring timely delivery, such as fee adjustments, are encouraged.
  7. Other related factors that give evidence of a proposer's capabilities to perform in a superior fashion should be detailed.

Full Proposals should be submitted to Research-HCCT@soa.org, by the end of the day on April 28, 2025. Decisions on whether a proposal is chosen will be communicated by May 30, 2025.

Selection Process

The (HCCT) Strategic Research Committee will appoint a Project Oversight Group (POG) to oversee the project. The [sponsoring entity/POG] is responsible for recommending the proposal to be funded. Input from other knowledgeable individuals also may be sought, but the HCCT will make the final recommendation, subject to Society of Actuaries Research Institute (SOA) leadership approval. An SOA staff research actuary will provide staff actuarial support.

Questions

Any questions regarding this RFP should be directed to Research-HCCT@soa.org.

Conditions

The selection of a proposal is conditioned upon and not considered final until a Letter of Agreement is executed by both the Society of Actuaries Research Institute and the researcher.

The Health Care Cost Trends Program Steering Committee reserves the right to not award a contract for this research. Reasons for not awarding a contract could include, but are not limited to, a lack of acceptable proposals or a finding that insufficient funds are available. The Society of Actuaries Research Institute also reserves the right to redirect the project as is deemed advisable.

The Society of Actuaries Research Institute plans to hold the copyright to the research and to publish the results with appropriate credit given to the researcher(s).

The Society of Actuaries Research Institute may choose to seek public exposure or media attention for the research. By submitting a proposal, you agree to cooperate with the Society of Actuaries in publicizing or promoting the research and responding to media requests.

The Society of Actuaries Research Institute may also choose to market and promote the research to members, candidates and other interested parties. You agree to perform promotional communication requested by the Society of Actuaries Research Institute, which may include, but is not limited to, leading a webcast on the research, presenting the research at an SOA meeting, and/or writing an article on the research for an SOA newsletter.

Conflict of Interest

You agree to disclose any of your material business, financial and organizational interests and affiliations which are or may be construed to be reasonably related to the interest, activities and programs of the Society of Actuaries Research Institute.

Appendix

The cost ranges below are intended as a guide for budgeting project costs for proposals in response to SOA Research Institute Request for Proposals (RFP). Please note these figures span the 33rd to 66th percentiles for all projects as well as projects that involve a specific approach (lit review, survey, etc.). They are based on historical costs over several recent years. Expected costs for some RFPs may fall outside these ranges depending on the nature of the work and resources required for completion.

All Contracted Projects

This category includes all contracted projects that the Institute has undertaken within the last several years.
The 33rd-66th percentile project costs range is $25,000 - $50,000.

Literature Reviews

This category includes projects that involved only a literature review or the cost for the portion of a larger project that included a literature review.
The 33rd-66th percentile project costs range is $15,000 - $20,000.

Surveys

This category includes all projects that had a survey as their primary component.
The 33rd-66th percentile project costs range is $28,000 - $55,000.