HHS-Developed Risk Adjustment Model Algorithm “Do It Yourself (DIY)”Software Instructions for the 2020 Benefit YearApril 15, 2021 Update1Section 1343 of the Patient Protection and Affordable Care Act (PPACA) provides for apermanent risk adjustment program. To protect against potential effects of adverse selectionand help stabilize premiums in the individual and small group markets, the risk adjustmentprogram transfers funds from plans with relatively low-risk enrollees to plans withrelatively high-risk enrollees. It generally applies to non-grandfathered individual and smallgroup plans inside and outside Exchanges.The HHS risk adjustment methodology is described in the HHS Notice of Benefit andPayment Parameters for 2014 final rule (78 FR 15410), which was published in the FederalRegister on March 11, 2013. The HHS risk adjustment methodology for the 2020 benefityear is described in the HHS Notice of Benefit and Payment Parameters for 2020 final rule(84 FR 17454) (2020 Payment Notice final rule), which was published in the FederalRegister on April 25, 2019.2 The 2020 benefit year risk adjustment model was recalibratedusing blended coefficients from the 2016 and 2017 enrollee-level External Data GatheringEnvironment (EDGE) data and 2015 MarketScan data. The high-cost risk pool calculationincorporated into the HHS risk adjustment methodology beginning for the 2018 benefit yearcontinued with the same parameters for the 2020 benefit year.The methodology that HHS will use when operating a risk adjustment program on behalf of aState for the 2020 benefit year3 will calculate a plan average risk score for each covered planbased upon the relative risk of the plan’s enrollees, and apply a state payment transfer formulain order to determine risk adjustment payments and charges for plans within a State marketrisk pool. The HHS risk adjustment methodology addresses three considerations: (1) adverseselection in the individual and small group markets; (2) plan metal level differences andpermissible rating variation; and (3) the need for risk adjustment transfers that net to zero. Thefederally-certified risk adjustment methodology developed by HHS for the 2020 benefit year: Is developed on commercial claims data for a population similar to theexpected population to be risk adjusted and enrollee-level EDGE data,which directly reflects claims data for PPACA individual and small groupmarket enrollees; Employs the hierarchical condition category (HCC) grouping logic used in theMedicare risk adjustment program, but with HCCs refined and selected toreflect the expected risk adjustment population; Includes a selected number of Prescription Drug Categories (RXCs) and RXCinteractions in the adult models; Establishes concurrent risk adjustment models, one for each combination of1This document provides instructions for the HHS risk adjustment models for the 2020 benefit year, withrevisions from the draft 2020 benefit year software instructions, posted on the CCIIO website on January 25, 2021,available at ructions1192021final.pdf.2The final 2020 benefit year risk adjustment model coefficients were provided in the final rule (see the PatientProtection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2020; Final Rule; 84 FR17454 [April 25, 2019], available at: pdf/2019-08017.pdf).3HHS will operate risk adjustment for the 2020 benefit year in all 50 states and the District of Columbia.1

metal level (platinum, gold, silver, bronze, catastrophic) and age group (adult,child, infant);Pools catastrophically high-cost enrollees nationally with a portion of the costsfunded by a percent of premium charge to issuers of risk adjustment coveredplans in each market;Results in state transfers that net to zero within a State market risk pool;Adjusts state transfers for plan metal level, geographic rating area, induceddemand, premium assistance Medicaid alternative plans, and age rating, so thattransfers reflect health risk and not other cost differences; andTransfers funds between plans within a State market risk pool based ondifferences in relative actuarial risk.Key Revisions in 2020: (August 2020 Revisions) Updated Table 2 to add 2020 CPT/HCPCS codesused for diagnosis filtering, as described in Section II. August update ofTable 2 included review of 2020 quarterly updates with effective dates as ofApril 1, 2020. Replaced the 2018 column of code information with 2019codes (used for historical data purposes). As a result of the CoronavirusDisease 2019 (COVID-19) public health emergency, the CPT/HCPCS list inTable 2 was expanded to include telehealth and telephonic service codes,previously not accepted for HHS-operated risk adjustment: 9 e-visit codesand 6 audio-only telephone evaluation/assessment and management codes.These additional 15 codes (and all other telehealth services allowable onTable 2) will be accepted for risk adjustment eligible diagnosis filtering forthe HHS-operated risk adjustment program applicable for the individual,merged and small group markets for the 2020 benefit year, if the services areotherwise allowable under applicable state law. For more information on theuse of telehealth and telephonic services in the HHS-operated riskadjustment program, please refer to the Risk Adjustment Telehealth andTelephone Services During COVID-19 FAQs (link). (January 2021 Revisions) Updated Table 2 to include review of 2020quarterly updates of CPT/HCPCS codes with effective dates as of October 6,2020. (August 2020 Revisions) Revised Table 3 ICD-10 to HHS-Condition Categories(CC) Crosswalk to remove Fiscal Year (FY) 2019 and Calendar Year (CY) 2019Medicare Code Editor (MCE) columns. Revised explanatory text in Sections IIand V to clarify that FY2020 ICD-10 diagnosis codes and FY2020 MCE editsshould be used in 2020 benefit year risk adjustment and that FY2019 code validinformation is retained for historical data purposes. (January 2021 Revisions) Revised Table 3 to contain FY2020 and FY2021 ICD10 diagnosis codes and FY2020 and FY2021 MCE age and sex conditions.Updated ICD-10 code labels to reflect changes in FY2021. Updated CCassignments to account for new FY2021 ICD-10 codes. Updated the combinedset of MCE age and sex conditions to be used for Calendar Year (CY) 2020 thatcovers both fiscal years (FY2020 and FY2021). Revised explanatory text inSections II and V to clarify the use of FY2020 and FY2021 ICD-10 diagnosiscodes and MCE edits.2

(August 2020 Revisions) Updated Table 9 Model Factors for the 2020 benefit year(using 2015 MarketScan data and 2016 and 2017 EDGE data). (August 2020 Revisions) Updated Tables 10a and 10b to contain NDCs and HCPCScodes in the National Library of Medicine’s RxNorm dataset as of April 2020. (January 2021 Revisions) Updated Tables 10a and 10b to contain NDCs and HCPCScodes in the National Library of Medicine’s RxNorm dataset as of October 5, 2020.(Tables 10a and 10b will be updated and posted on REGTAP in April 2021 as part ofthe final software package for the 2020 benefit year.) (April 2021 Revisions) Updated Tables 10a and 10b to contain NDCs and HCPCScodes in the National Library of Medicine’s RxNorm dataset as of December 1, 2020to be used as the final set of NDC and HCPCS codes for the 2020 benefit year.4Updated Table 10a to remove Descovy from RXC 1 Anti-HIV Agents. Enrolleesthat use Descovy in combination with other HIV treatment drugs will still receivecredit for RXC 1. The Descovy RXC mappings were removed from the EDGEglobal reference data on January 13, 2021. This change is consistent with theexclusion of Truvada from RXC 1. Updated Table 10a to removeHydroxychloroquine from RXC 9 Immune suppressants and Immunomodulators.Hydroxychloroquine was removed from RXC 9 due to concerns about off-labelprescribing and unrepresentative expenditures. (August 2020 Revisions) Updated instructions in Section III to include anadditional Health Insurance Oversight System (HIOS) variant ID with avalue of “01” that has a cost-sharing reduction (CSR) risk adjustment factorof 1.00 and a person-level CSR indicator of 0. In the algorithm, only CSRindicator values of 1-13 are recognized; if CSR indicator 0, the riskadjustment factor is 1.00 for each metal level.The HHS risk adjustment methodology consists of concurrent risk adjustment models, onefor each combination of metal level (platinum, gold, silver, bronze, and catastrophic) and agegroup (adult, child, infant). This document provides the detailed information needed tosimulate the calculation of risk scores given individual diagnoses. Please direct questionsregarding these instructions to HHS HCC Risk Adjustment Models [email protected]. This mailbox will be used only to answer questions pertaining tooperations of the HHS risk adjustment models. We look forward to assisting with inquiriespertaining to your risk adjustment program operations using the HHS-HCC risk adjustmentmodels for the 2020 benefit year.CMS has created two versions of software (SAS software and HHS-developed riskadjustment model algorithm “Do It Yourself [DIY]” software) and software instructionsfor issuers to use with their enrollment data to simulate their enrollee populations’ 2020benefit year risk scores within the HHS-HCC risk adjustment models. This software isbeing issued only as a supplemental tool for issuers of risk adjustment covered plansto better understand and simulate the calculation of plan liability risk scores fortheir enrollees.This software is not a required prerequisite to submitting claims data to the EDGE4Because of the potential issue of leading zeroes in Excel, Tables 10a and 10b were created as separate “.txt” filesin addition to including them in the accompanying Excel file of tables.3

server for risk adjustment, nor is it a requirement of the HHS-operated riskadjustment program. Furthermore, issuers should not use this software to filter theirown claims prior to submitting claims data to the EDGE server. The EDGE serversoftware may have several additional layers of operational rules. The algorithmsoftware merely provides a simulation tool for issuers to calculate enrollees’ riskscores. Because risk adjustment transfers under the state payment transfer formulaare dependent on the data submitted by other issuers within the State market riskpool, an issuer that wishes to use this information to assist with estimating its 2020benefit year state transfer(s) should do so with caution and in combination withother data.List of TablesTable 1. Model MembershipTable 2. CPT/HCPCS Included List for Diagnosis Code FilteringTable 3. ICD-10 to HHS-Condition Categories (CC) CrosswalkTable 4. HHS-Hierarchical Condition Categories (HCC) HierarchiesTable 5. Age-Sex VariablesTable 6. Additional Adult VariablesTable 7. Additional Child VariablesTable 8. Additional Infant VariablesTable 9. Model FactorsTable 10a. Prescription Drug Categories (RXC) to National Drug Code (NDC) CrosswalkTable 10b. Prescription Drug Categories (RXC) to Healthcare Common Procedure CodingSystem (HCPCS) CrosswalkTable 11. Prescription Drug Categories (RXC) HierarchiesTerminology: The abbreviations ICD-10 and ICD-10-CM are used interchangeably in thisdocument to refer to the International Classification of Diseases, 10th Revision, ClinicalModification. The abbreviations CC and HCC used in these instructions refer to the HHSHCC risk adjustment models. These are different HCCs from those used in the CMS-HCCrisk adjustment model for Medicare Part C.I.IntroductionThe risk adjustment program established under Section 1343 of PPACA transfers funds fromlower than average risk plans to higher than average risk plans using a specified methodology.The HHS risk adjustment methodology generally includes risk adjustment models, adetermination of plan average actuarial risk, and a calculation of payments and charges.5 Thelatter two elements are referred to by HHS as the state payment transfer formula. Thisdocument provides a detailed description of the HHS risk adjustment models and enablesinterested parties to develop software to determine risk scores given individual diagnoses.This document should be viewed as a supplemental tool to the 2020 benefit year methodology5The HHS-operated risk adjustment program also includes a data collection approach, data validationprocedures, and a schedule for program operation. These elements are not discussed in this document.4

finalized in the HHS Notice of Benefit and Payment Parameters for 2020 final rule (84 FR17454). Please note that the models described herein were finalized in this final rule.The following is a description of the HHS risk adjustment models for the 2020 benefityear. This description includes a narrative and accompanying tables for calculating the riskscores from diagnoses in the HHS risk adjustment models. The HHS risk adjustmentmodels calculate risk scores by summing an enrollee’s factors (age/sex, HCCs, RXCs,enrollment duration, and interaction terms).6 This description shows, in detail, howindividual diagnoses are assigned to HCCs and NDCs/HCPCS codes are assigned toRXCs, and then allows the user to build individual risk scores from those inputs.These instructions outline the steps needed to produce individual risk scores from the HHSrisk adjustment models.The HHS risk adjustment methodology includes risk adjustment models based on age, asdetailed in Table 1 Model Membership. Adult scores are calculated for enrollees whose age isequal to or greater than 21 using the adult model set. Child scores are calculated for enrolleesage 2 – 20 using the child model set. Infant scores are calculated for enrollees age 0 1 usingthe infant model set. Because HHS models predict plan liability, there are 5 models withineach age group model set – one each for platinum, gold, silver, bronze, and for the individualmarket only, catastrophic pl

Table 3. ICD-10 to HHS-Condition Categories (CC) Crosswalk Table 4. HHS-Hierarchical Condition Categories (HCC) Hierarchies Table 5. Age-Sex Variables Table 6. Additional Adult Variables Table 7. Additional Child Variables Table 8. Additional Infant Variables Table 9. Model Factors Table 10a. Prescription Drug Categories (RXC) to National Drug .