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**Long-term implications of the revenue transfer methodology in the affordable care act.**
*(English)*
Zbl 1429.91281

Summary: The Affordable Care Act introduced a revenue transfer formula that requires insurance plans with generally healthier enrollees to pay funds into a revenue transfer pool to reimburse plans with generally less healthy enrollees. For a given plan, the issue arises of whether the plan will be a payer into or a receiver from the pool in a chosen future year. To examine that issue, we analyze data from The Actuary Magazine on transfer payments for 2014–2015, and we infer strong evidence of a statistical relationship between year-to-year transfer payments. We also apply to the data a Markov transition model to study annual changes in the payer-receiver statuses of insurance plans. We estimate that the limiting conditional probability that an insurance plan will pay into the pool, given that the plan had paid into the pool in 2014, is 55.6%. Further, that limiting probability is attained quickly because the conditional probability that an insurance plan will pay into the pool in 2024, given that the plan had paid into the pool in 2014, is estimated to be 55.7%. We also find the revenue transfer system to have the disturbing feature that once a plan enters the “state” of paying into the pool, it will stay in that state for an average period of 4.87 years; also, once a plan has received funds from the pool, it will stay in that state for an average period of 3.89 years.

### MSC:

91G05 | Actuarial mathematics |

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

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\textit{I. Muzumdar} and \textit{D. Richards}, N. Am. Actuar. J. 23, No. 4, 591--597 (2019; Zbl 1429.91281)

### References:

[1] | American Academy of Actuaries., Insights on the ACA Risk Adjustment Program (2016), Washington, DC: American Academy of Actuaries |

[2] | Blake, I. F., An introduction to applied probability (1979), New York: Wiley, New York · Zbl 0504.60001 |

[3] | Centers for Medicare & Medicaid Services, HHS-operated risk adjustment methodology meeting, discussion paper (2016), Baltimore, MD |

[4] | Department of Health and Human Services. 2013. 45 CFR Parts 153, 155, 156, et al. Patient protection and affordable care act. Notice of benefit and payment parameters for 2014. Federal Register 78 (47):15410. |

[5] | Goldman, R. (2016) |

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

[7] | Li, M.; Richards., D., Statistical implications of the revenue transfer methodology in the Affordable Care Act, North American Actuarial Journal (2019) · Zbl 1411.91301 |

[8] | Perlman, D. J.; Liner., D. M., Financial analysis of ACA health plan issuers (2016) |

[9] | Pope, G. C., Risk transfer formula for individual and small group markets under the Affordable Care Act, Medicare & Medicaid Research Review, 4, 3 |

[10] | Ross, S. M., Introduction to probability models (2014), Amsterdam: Elsevier, Amsterdam |

[11] | Siegel, J.; M. Liner, D., ACA risk adjustment: Special considerations for new health plans (2015) |

[12] | Wrobel, K. J. (2016) |

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.