Long-Term Implications of the Revenue Transfer Methodology in the Affordable Care Act

Ishan Muzumdar and Donald Richards

North American Actuarial Journal, 2019, vol. 23, issue 4, 591-597

Abstract: 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.

Date: 2019
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/10920277.2019.1598269 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:uaajxx:v:23:y:2019:i:4:p:591-597

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/uaaj20

DOI: 10.1080/10920277.2019.1598269

Access Statistics for this article

North American Actuarial Journal is currently edited by Kathryn Baker

More articles in North American Actuarial Journal from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().