Is that health insurer a daredevil?

Start-up health insurers have had to enter zero, or a figure close to zero, for the prior year, and that has led to new health insurers reporting infinite or nearly infinite first-year growth rates. District of Columbia insurance regulators asked the Health RBC Blanks Working Group to address the problem, Capital Adequacy Task Force officials say in a revision drafting note.

The growth rate computation issue has become a headache this year because the Patient Protection and Affordable Care Act (PPACA) has led to the creation of many new health insurance entities, such as the new nonprofit, member-owned CO-OP plans.

Originally, task force officials say, Health RBC Working Group members had thought about solving the problem by assuming the hypothetical prior-year revenue for a start-up should be about 20 percent lower than the projected revenue for the current year. That approach had problems, because it failed to produce an RBC charge for a new company that did poorly and failed to meet its growth target, officials say.

In the new draft, officials say start-up managers can use the first year’s projected underwriting risk revenue and the first year’s net underwriting risk RBC that were approved by the start-up’s official home state regulators in place of the prior-year revenue and net underwriting risk RBC figures. The measure of risk would then be the gap between the projected figures and the actual current-year figures, rather than the gap between current-year figures and the prior-year figures.