Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Life Health > Health Insurance

Regulators unsure about PPACA risk programs

Your article was successfully shared with the contacts you provided.

Some of the crafters of insurance company accounting rules want to emphasize how unpredictable the new Patient Protection and Affordable Care Act risk management programs may be.

Members of two insurance accounting groups — the Emerging Accounting Issues Working Group and the Statutory Accounting Principles Working Group — have put warnings about PPACA “3 R’s” risk program uncertainty in a new version of a draft of official PPACA accounting advice.

The working groups are part of the Financial Condition Committee at the National Association of Insurance Commissioners.

The final version of the draft guidance — Interpretation 2013-04: Accounting for the Risk Sharing Provisions of the Affordable Care Act — could affect when carriers can put money from the PPACA risk management programs in their statutory income and capital totals.

The 3 R’s programs — a temporary reinsurance program; a temporary “risk corridors” underwriting profit margin protection program; and a permanent risk adjustment program that’s supposed to allocate cash from plans with low-risk enrollees to plans with high-risk enrollees — are supposed to help protect carriers from PPACA-related shifts in claim risk.

The members of Congress who wrote PPACA said they based the PPACA risk adjustment program on an existing Medicare Advantage program.

An earlier draft of the NAIC’s PPACA accounting advice said the PPACA risk adjustment program “bears significant similarities to the Medicare Advantage risk adjustment program.”

In a revised draft the working group approved this weekend, the groups took out the word “significant.”

The groups added a footnote warning that the PPACA program has “significant differences from the Medicare Advantage risk adjustment program,” and, in the text of the guidance, they added this statement: ”Reporting entities should be aware of the significant uncertainties involved in preparing estimates and be both diligent and conservative in their estimations,” according to the working groups’ version of the guidance.

Insurance accounting rules normally let insurers include payments coming from government health programs quickly, even if the government has not yet made the payments.

The working groups say an insurer expecting risk corridor program payments should treat the payments as nonadmitted assets until 90 days after the payment is due, not until 90 days after the payment is accrued, because U.S. Department of Health and Human Services risk corridor program rules create uncertainty about how much HHS will really pay out. 

The groups officially decided to ask another NAIC panel, the Statutory Accounting Principles Working Group, to add the PPACA risk program uncertainty warnings to the PPACA accounting guidance.

The groups worked on the PPACA accounting guidance Saturday at the NAIC’s spring meeting in Orlando.

See also:


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.