Original Notice.

     Preproposal statement of inquiry was filed as WSR 12-10-079.

     Title of Rule and Other Identifying Information: Risk adjustment program.

     Hearing Location(s): Office of the Insurance Commissioner, Training Room T-120, 5000 Capitol Way South, Olympia, WA 98504, on February 5, 2013, at 10:00 a.m.

     Date of Intended Adoption: February 6, 2013.

     Submit Written Comments to: Meg Jones, P.O. Box 40258, Olympia, WA 98504, e-mail rulescoordinator@oic.wa.gov, fax (360) 586-3109, by February 4, 2013.

     Assistance for Persons with Disabilities: Contact Lorie Villaflores by February 3, 2013, TTY (360) 586-0241 or (360) 725-7087.

     Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: RCW 48.43.720 directs the commissioner to establish the state's risk adjustment program by rule. This proposed rule accomplishes that directive. The proposed rule establishes an annual process to determine whether the state or United State Department of Health and Human Services will administer the program for the following year, based on consultation with an advisory group comprised of issuer representatives, the state health benefit exchange, and the administrator for the program (if in place). The proposed rule incorporates the modeling of data as a key resource for the advisory group, to be collected and retained by an independent actuarial firm retained by the commissioner. The proposed rule defers to federal administration of the program for 2014-2015 benefit years.

     Reasons Supporting Proposal: The commissioner worked with an advisory group of carriers to review options for the risk adjustment program prior to issuing this proposed text. The proposed rules represent the group's concensus recommendation, based on modeling using voluntarily submitted data from the carriers to inform this approach.

     Statutory Authority for Adoption: RCW 48.02.060, 48.43.720.

     Statute Being Implemented: RCW 48.43.720.

     Rule is necessary because of federal law, Pub. Law 111-148, as amended (2010).

     Name of Proponent: Office of the insurance commissioner, governmental.

     Name of Agency Personnel Responsible for Drafting: Meg Jones, 302 Syd Snyder Boulevard, Olympia, WA, (360) 725-7170; Implementation: Barb Flye, 302 Syd Snyder Boulevard, Olympia, WA, (360) 725-7043; and Enforcement: Carol Sureau, 5000 Capitol Boulevard South, Olympia, WA, (360) 725-7050.

     No small business economic impact statement has been prepared under chapter 19.85 RCW. None of the affected entities constitutes a small business.

     A cost-benefit analysis is required under RCW 34.05.328. A preliminary cost-benefit analysis may be obtained by contacting Meg Jones, P.O. Box 40258, Olympia, WA 98502 [98504], phone (360) 725-7170, fax (360) 586-3109, e-mail rulescoordinator@oic.wa.gov.

January 2, 2013

Mike Watson

Chief Deputy

Insurance Commissioner

     (2) Beginning September 1, 2015 or on an alternate date established by the U.S. Department of Health and Human Services (HHS), the commissioner will annually publish a notice of benefit and payment parameters (notice). The notice must include a statement of intent regarding whether the state or HHS will administer the program. The commissioner will determine the form of the notice, which will be consistent with the form required by HHS.

     (3) HHS will administer the program for 2014-2015. Issuers must comply with HHS requirements for the risk adjustment program.

     (4) Prior to publishing the annual notice of benefit and payment parameters, the commissioner will consult with an advisory group comprised of representatives from issuers who participate in the program, from the Health Benefit Exchange, and, if under contract or otherwise established by the legislature, the commissioner's designated administrative entity for the state risk adjustment program.

     (a) The role of the advisory group is to review the prior state level performance of the risk adjustment program, and assist the commissioner in determining the benefit to state insurance markets of using:

     (i) state-specific factors for risk adjustment; and

     (ii) a state specific methodology for risk adjustment incorporating both the issuer and the enrollee's perspective.

     (b) If an issuer wishes to participate in the advisory group, it must notify the commissioner in writing of its designated participant not later than May 1 of each year.

     (c) The advisory group must review the modeling and make recommendations based on the principles of preserving enrollment on existing plans for enrollees, ensuring market stability, and addressing adverse selection risk and experience in Washington state.

     (5) For a benefit year during which HHS administers the program, within thirty days of its submission of program data to HHS, an issuer must submit to an actuarial firm designated by the commissioner, the same data that it submits to HHS. Corrected data must also be submitted. All issuers participating in the risk adjustment program in Washington state, not just those participating in the advisory group, must conform to this requirement.

     (a) The data may only be used to perform modeling to inform the advisory group and commissioner in the annual decision-making process described in this section. Modeling done using the data must de-identify both issuers and any enrollees. Each advisory group participant is entitled to review all modeling reports, and upon request, learn which deidentified issuer represents their data set. The actuarial firm may not otherwise disclose the identity of data set sources.

     (b) The actuarial firm and each issuer must execute all necessary privacy and security agreements to ensure the confidentiality and privacy of personal health information, establish remedies for unauthorized release or distribution of the data that are consistent with state and federal law, provide for the retention of the data for not less than ten years, and for the destruction of the data after a ten year period of time. The commissioner will prepare a template for use by the actuarial firm and issuers. The agreement must be identical for each issuer, unless the commissioner specifically agrees to an exception or change requested by an issuer or the actuarial firm for good cause. The commissioner will resolve disputes between the actuarial firm and an issuer.

     (6) An issuer that does not submit data pursuant to this rule is subject to enforcement under title 48 RCW.

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