ACA Risk Mitigation Programs (3Rs) Update Kevin M. Dyke, FCAS, MAAA Chief Actuary 30 th Annual MAHP Summer Conference July 17, 2015 1

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ACA Risk Mitigation Programs (3Rs) Update

Kevin M. Dyke, FCAS, MAAAChief Actuary

30th Annual MAHP Summer ConferenceJuly 17, 2015

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Your Presenter

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And let’s not forget our other speaker

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When we last met in July 2013…

Issuers wishing to participate in either the Individual or SHOP Marketplace in 2014 filed their rates by May 31, 2013. DIFS was in the midst of its review.• All non-grandfathered policies were expected to be

converted to fully compliant ACA policies in 2014. There were no “transitional” or “extended transitional” policies.– Affected rate adequacy for 2014 due to these policies

being excluded from the single risk pool.

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When we last met in July 2013…

• The risk corridors program, as designed, was to be paid for through budget appropriations, not revenue neutral.– As a revenue neutral program, it creates additional

risk of underpricing.• Self-insured groups not administered by a TPA

were required to pay into the Reinsurance program in 2014 but not in 2015 and 2016.

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Level Setting – 3Rs

Claims Paid by Issuer

Reinsurance Recoverable

(-)

Risk Adjustment Recoverable

(-) or Payable (+)

Risk Corridor

Recoverable (-) or

Payable (+)

Net Paid

Claims

•Temporary (2014-16)• Individual market only•Covers a % of losses within a layer up to $250,000•Funded by contributions from all markets

•Permanent•Transfers funds from plans with lower risk enrollees to plans with higher risk enrollees•Revenue neutral (payments = receipts)

•Temporary (2014-16)•QHPs only•Relief for high loss ratios, after providing for reinsurance and risk adjustment.•Now revenue neutral (originally a budgeted expense)

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Recall that the 3Rs are NOT…

Reading, WRiting, ARithmetic

Reduce, Reuse, Recycle

Repeal, Retool, Replace (Obamacare)

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Reinsurance Program Update: Improved Terms, but Too Late for Rates

Coverage YearAs Proposed

Prior to Coverage Year

Modified During Coverage Year

Finalized Following

Coverage Year

201480% of layer

between $60,000 and $250,000

80% of layer between $45,000

and $250,000


and $250,000

201550% of layer

between $70,000 and $250,000


and $250,000TBD

201650% of layer

between $90,000 and $250,000

TBD TBD

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Reinsurance Program Update

• Reinsurance contributions not required for 2015 and 2016 from self-insured entities not managed by a third party administrator

• Reinsurance contributions by year (per member per month)– 2014: $5.25– 2015: $3.67– 2016: $2.25

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Risk Adjustment Program Update

• 2014 model maintained for 2015 year• Model recalibrated for 2016 year– Factors adjusted to reflect enrollee health risk

using claims data– Reflect relative costs of given disease to average

spending– Uses multiple years of data

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Risk Corridors Program Update

• Includes state-by-state adjustments to reflect expected impact of transitional policies not included in risk corridor data. (No adjustment for early renewals)

• Budget neutrality– 2015 Notice of Benefit and Payment Parameters changed

program from an appropriation to a budget neutral item– Excess collections are carried forward– Deficits caused payments to be prorated downward, with

deficit carried forward

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Risk Corridors Program Update

• Deficit/surplus at end of 2016– Surplus will result in changes to profit floor and

administrative cost ceiling– Deficit will use “other sources” for funding,

subject to appropriations• Risk corridor payments for 2014

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2014 Report on Final Reinsurance and Risk Adjustment Transfer Payments

• Final reports issued June 30, 2015• Detailed reinsurance payments and risk

adjustment transfer payments for the 2014 coverage year, by state, market, and issuer

• NAIC actuaries (including MI) requested CCIIO provide more detailed information showing premiums and covered lives associated with each payment.

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Final 2014 Report: Reinsurance

• Coinsurance raised from 80% to 100%, with $1 billion carried over to 2015-16.

• National payments: $7.9 billion• Michigan payments: $200.2 million• Payments ranged from 0-30%* of premiums

per issuer

*Percentages represents DIFS estimated percent of premium using 2014 Supplemental Health Care Exhibit data.

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Final 2014 Report: Reinsurance Payments by Issuer

BCBSM (1

8%)

BCN (15%)

HealthPlus In

s Co (1

5%)

Humana M

edical P

lan (1

9%)

Health Allia

nce Plan

(30%)

All Oth

ers (12%)

020406080

100120 $104

$55

$8 $8 $6 $14

Average 2014 rate provision = 12%

Average receipt = 15%

Note: Amounts in millions. Percentage represents DIFS estimated percent of premium using 2014 Supplemental Health Care Exhibit data.

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Final 2014 Report: Risk Adjustment

• Risk adjustment transfers funds from plans with lower risk profiles to plans with higher risk profiles (i.e. health status)

• Transfers netted to $0 for Michigan for both individual and small group markets (whew!)

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Final 2014 Report: Risk Adjustment Transfers by Issuer

0

10

20

30

40

50

60

70

80$67

$5 $2 $2 $3

INDIVIDUAL Market

These are amounts transferred TO issuers.


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BCN (-13%)Humana Medical

Plan (-59%)HealthPlus Ins Co

(-7%)Total Health Care

USA (-3%)All Other Payors

(-4%)

-50-45-40-35-30-25-20-15-10

-50

-$47.0

-$25.0

-$3.6 -$1.1 -$2.3

INDIVIDUAL Market

These are amounts transferred FROM is-

suers.


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0

2

4

6

8

10

12

14

16$13.5

$0.5 $0.3 $0.1

SMALL GROUP Market

These are amounts transferred TO issuers.


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BCN (-1.6%)Federated Mutual

(-4.8%)Priority Health (-

0.5%)

Consumers Mutual (-

16.6%)All Other Payors

(-1.0%)

-6

-5

-4

-3

-2

-1

0

-$5.5

-$1.7 -$1.5 -$1.3

-$4.5

SMALL GROUP Market

These are amounts transferred FROM issuers.


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Thank you!

Documents

ACA Risk Mitigation Programs (3Rs) Update Kevin M. Dyke, FCAS, MAAA Chief Actuary 30 th Annual MAHP Summer Conference July 17, 2015 1