ERM-521-17: Risk Transfer Formula for Individual and Small Group Markets under the Affordable Care Act


#1

Reading Source: https://www.cms.gov/mmrr/downloads/mmrr2014_004_03_a04.pdf

Topics Covered in this Reading:

  • Abstract
  • Introduction
  • The Transfer Formula
    • Overview of Risk Transfer Formula
    • Transfer Formula in Depth
  • Components of the Transfer Formula
    • Adjustment to the Plan Liability Risk Score (PLRS) for Family Rating Rules
    • Actuarial Value (AV)
    • Allowable Rating Factor (ARF)
    • Geographic Cost Factor (GCR)
  • Numerical Simulations of Hypothetical Risk Transfer Scenarios
    • Scenario 1: Plans with Equal Coverage, No Risk Transfers
    • Scenario 2: Plans with Equal Coverage, with Risk Transfers
    • Scenario 3: Plans with Unequal Coverage, No Risk Transfers
    • Scenario 4: Plans with Unequal Coverage, with Risk Transfers
    • Scenario 5: Scenario 4 with Unequal Plan Enrollee Age Mix
    • Scenario 6: Scenario 5 with Induced Demand and Geographic Cost Differences
  • Conclusion
  • Appendix