MDH Study on State-based Risk Adjustment in the Individual and Small Group Market

In 2013, the Minnesota Legislature directed the Minnesota Department of Health (MDH) to study the potential costs and benefits of conducting state-based risk adjustment in Minnesota’s small group and individual health insurance markets (Laws of Minnesota 2013, chapter 108, article 1, section 65). Specifically, MDH was directed to:

• Evaluate the extent to which Minnesota's All Payer Claims Database (MN APCD) data could be used for conducting state-based risk adjustment;
• Collect additional data needed for the study of risk adjustment;
• Conduct modeling to determine if a Minnesota-based risk adjustment model could perform better and be more cost-effective than the federal risk adjustment model; and
• Submit a report to the Legislature outlining the study recommendations.

MDH retained the services of a vendor, Milliman-New York, to support this work. MDH sought input from a wide range of stakeholders, through a formal Request for Information (RFI) process and through public meetings and interviews.

Additional detail on the study approach is available in a Fact Sheet (PDF). An interim report to the Legislature (April 2014) that presented the initial findings is available at Risk Adjustment in the Individual and Small Group Market in Minnesota - A Progress Report (PDF).