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**Statistical implications of the revenue transfer methodology in the Affordable Care Act.**
*(English)*
Zbl 1411.91301

Summary: The Affordable Care Act (ACA) includes a permanent revenue transfer methodology that provides financial incentives to health insurance plans that have higher than average actuarial risk. In this article, we derive some statistical implications of the revenue transfer methodology in the ACA. We treat as random variables the revenue transfers between individual insurance plans in a given marketplace, where each plan’s revenue transfer amount is measured as a percentage of the plan’s total premium. We analyze the means and variances of those random variables and deduce from the zero-sum nature of the revenue transfers that there is no limit to the magnitude of revenue transfer payments relative to plans’ total premiums. Using data provided by the American Academy of Actuaries and by the Centers for Medicare & Medicaid Services, we obtain an explanation for empirical phenomena that revenue transfers were more variable and can be substantially greater for insurance plans with smaller market shares. We show that it is often the case that an insurer that has decreasing market share will also have increased volatility in its revenue transfers.

### MSC:

91B30 | Risk theory, insurance (MSC2010) |

62P05 | Applications of statistics to actuarial sciences and financial mathematics |

### Software:

R
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BibTeX
XML
Cite

\textit{M. Li} and \textit{D. Richards}, N. Am. Actuar. J. 23, No. 1, 27--32 (2019; Zbl 1411.91301)

### References:

[1] | Insight on the ACA Risk Adjustment Program, (2016), Washington, DC: ACA, Washington, DC |

[2] | 2017 |

[3] | 2016 |

[4] | 2015 |

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[6] | 2016aModern Healthcare |

[7] | 2016bModern Healthcare |

[8] | Kautter, J.; Pope, G. C.; Keenan, P., Affordable Care Act risk adjustment: Overview, context, and challenges, Medicare & Medicaid Research Review, 4, 3, (2014) |

[9] | 2013Federal Register |

[10] | Pope, G. C.; Bachofer, H.; Pearlman, A.; Kautter, J.; Hunter, E.; Miller, D.; Keenan, P., Risk transfer formula for individual and small group markets under the Affordable Care Act, Medicare & Medicaid Research Review, 4, 3, (2014) |

[11] | R: A Language and Environment for Statistical Computing, (2013), R Foundation for Statistical Computing: R Foundation for Statistical Computing, Vienna, Austria |

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[13] | 2016Modern Healthcare |

This reference list is based on information provided by the publisher or from digital mathematics libraries. Its items are heuristically matched to zbMATH identifiers and may contain data conversion errors. It attempts to reflect the references listed in the original paper as accurately as possible without claiming the completeness or perfect precision of the matching.