Risk Transfer Formula for Individual and Small Group Markets Under the Affordable Care Act

• DOI: 10.5600/mmrr.004.03.a04
• Publication Date: 2014-09-05T19:35:17Z
• Authors: John Kautter; Gregory Pope; Henry Bachofer; Andrew Pearlman
• Keywords: 03 medical and health sciences; Insurance, Health; 0302 clinical medicine; Health Insurance Exchanges; Patient Protection and Affordable Care Act; Humans; Risk Adjustment; United States

The Affordable Care Act provides for a program of risk adjustment in the individual and small group health insurance markets 2014 as Marketplaces are implemented new market reforms take effect.The purpose is to lessen or eliminate influence selection on premiums that plans charge.The methodology includes model transfer formula.This article third three this issue Medicare & Medicaid Research Review describe ACA focuses formula.In our first companion article, we discussed key issues choices developing methodology.In second paper, described used calculate scores.In present formula.We how plan score combined with factors allowable premium rating, actuarial value, induced demand, geographic cost, statewide average formula calculates transfers among plans.We then show each factor determined, well relate other formula.The goal offset effects costs while preserving differences due such value differences.Illustrative numerical simulations operating anticipated hypothetical scenarios.