Qualified Health Plans (QHPs) are beginning to enroll new members through the Health Insurance Exchange (HIX) Marketplace as envisioned through the Affordable Care Act. One of the requirements that each health plan must meet is the establishment of an Edge Server.

An Edge Server is a one-directional, secure data sharing platform that will allow the Department of Health and Human Services to receive de-identified, aggregated member health data from the QHPs. This exchange of data occurs at the “edge” of a health plan’s system, minimizing data transfers, avoiding the need for member-level enrollment and claims information to be shared with HHS thus ensuring health plans’ proprietary data remain secure. Access to these data is critical to evaluating the appropriate risk score and reinsurance reporting from the health plan.

With potentially millions of people securing coverage through the HIX Marketplace, health plans face many uncertainties – among them is understanding the risk they face in taking on new members with limited or no health history. The ACA includes several provisions designed to encourage competition based on price and quality, while managing health plans’ risk. These provisions – often referred to as the “3 R’s” – aim to level the playing field and mitigate risk for health plans operating on the Exchanges:

* Risk Adjustment: As a permanent program, risk adjustment scores will be used to avoid adverse selection by transferring funds from plans that enroll lower risk individuals to plans with higher risk populations.

* Risk Corridor: The risk corridor provision protects insurers against the uncertainty in rate-setting in the first three years by limiting large losses or profits.

* Reinsurance: The transitional reinsurance provision will stabilize premiums for coverage in the individual and small employer group markets by protecting health plans that experience unpredictable, high-cost conditions during the first three years of the Exchange.

HHS’ ability to analyze and underwrite the risk equitably is informed by the aggregated data provided through the Edge Server. While health plans are pushing to “stand up” an Edge Server environment before 2014, they must also take a longer-term view beyond just the deployment and testing of infrastructure.

This effort requires health plans to develop a nimble and highly configurable solution in order to maintain and analyze granular, member-level information that will be accurately summarized, de-identified, and provided to HHS on an ongoing basis. As newly insured lives are added to the system, recalibrations and recalculations must occur to ensure accuracy in data management, reporting, and ultimately the plans’ risk score and reinsurance calculations.

Health plans must have the systems in place now to validate the accuracy and integrity of the data provided to HHS. Over time, this work also includes understanding new members’ profiles to quickly identify gaps in care and the interventions needed so that the necessary resources can be directed to improve health outcomes, care quality, and financial performance.

The ACA provisions are in place to protect the privacy of health data and to lay a foundation for successful health plan competition. It is important for health plans to understand the Edge Server requirement and how the data will be used by HHS, so that these data insights can be leveraged to empower business decisions, give insights into risk score accuracy, and ensure regulatory compliance.

Monthly reporting to the Edge Server begins in January 2014. Many health plans will meet HHS at “the edge” of their systems to exchange information and satisfy regulatory requirements. Who will harness the data insights to effectively navigate the new HIX Marketplace is still to be determined.

Eric Sullivan is the senior director of product innovation and data management at Inovalon Inc., a data warehouse and analytics vendor.

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