Actuarial Vietnam

“And I lost my baby brother, my best friend, and my left hand In a no-win situation in a place called Vietnam" -“This Ain’t Nothing”, Craig Morgan?

Non-compliant rating practices have been an Affordable Care Act (ACA) marketplace and actuarial professionalism concern since 2016. The related discussion pertains not to overall premium levels, but rather to the premium relationships between benefit plans; the tension is between what the law requires and what actuaries would do absent the law. Permitted noncompliance and various degrees of enforcement have led to different premium landscapes across the country.

Public and private discussion of this tension has been uncomfortable at times and not always fully transparent. There was a significant development on Friday related to this ongoing discussion; it was the first direct public criticism of actuaries by non-actuaries related to rating compliance with the ACA’s single risk pool requirement. As the historical obfuscation of rating dynamics has recently heightened and I have a genuine sense that many people reading this have been partially educated by bad actors, it is instructive to review the history to understand today’s perspectives.

ACA Rating History

In 2014 and 2015, ACA individual market premium relationships were generally compliant and aligned with coverage generosity, fulfilling the ACA’s single risk pool requirement and goal that “individual-market insurers … no longer compete based on their ability to avoid risk, but rather on their ability to deliver high-quality care at an affordable price.” ?This aligned with the vision of “a reformed individual health insurance market (which) included requirements and incentives for insurers to manage risk instead of avoiding it”.

As ACA experience emerged, premium relationships changed to incorporate plan and metal level claims experience. Directionally, experience-based premiums for subsidy-determining silver plans declined relative to other metal levels. The resulting implication was that consumers in non-silver plans were adversely impacted by both higher premiums and lower subsidies (if subsidy eligible).

Understanding the direction of the shift in premiums is intuitive. The primary claims experience differentiator was favorable experience on enrollees with incomes below 200% of the Federal Poverty Level (FPL) and eligible for generous cost-sharing reduction (CSR) subsidies. Access to these generous CSR benefits required eligible enrollees to select a silver plan, one of the four metal levels on the ACA exchanges. Accordingly, enrollment skewed by income level and profitability fostered a financial imbalance in profitability by metal level. Risk selection, which the ACA intended to prohibit, had reemerged and was alive and well.

As Stan Dorn explains, this profitability differential was not proprietary intelligence protected by a few large companies with voluminous data; he writes in Health Affairs, “Soon after the ACA took effect, insurers identified CSR consumers as profit centers. At a major national conference in 2016, a leading actuarial firm’s presentation explained?that ‘CSRs are Key to Success.’ The presentation noted that CSR enrollees dominated profitable member cohorts, and enrollees in non-silver metal levels dominated the unprofitable cohorts.” It should be disclaimed that the referenced presentation had a caveat that calculated factors were not recommended, but “desired” metal level experience adjustments relative to bronze plans were -14% for silver, 16% for gold, and 28% for platinum. Premium relationships had already moved in this desired direction in 2016 but moved significantly further in 2017.

ACA marketplaces had shifted back to a pre-ACA rating environment where competition was based on ability to avoid risk, rather than the ability to deliver high-quality care at an affordable price. Risk segmentation was unashamedly practiced. As one actuary put it, “we are targeting to have the lowest silver premium in the market; everything else is just window dressing to satisfy regulators.”

On an unrelated rate filing that I was involved in reviewing, a new insurer in a marketplace projected one gold enrollee, one platinum enrollee, a handful of bronze enrollees, and thousands of people enrolling in silver plans. In case you’re wondering, this was not a Medicaid-focused insurer entering the marketplace to complement its core business. I did not appreciate the risk selection ideal, but I did appreciate the bold transparency. Despite the product availability, the insurer was clear that it had no intention of selling gold or platinum plans and its premium rates clearly reflected a risk segmentation strategy. Across the country, another health insurance executive said, “Why would a plan want to sell gold in a competitive market? You reward system that encourages creative ways to avoid enrollment because it threatens your company’s solvency. That is the disequilibrium that can warp markets (if everyone understands it or after a plan blows up)”. Risk selection had become the name of the dance, and everyone wanted a whirl with silver.

Due to the inherent silver selection enhancement resulting from CSR benefit eligibility, there was never any expectation of 25% enrollment across each of the four metal levels but there was an expectation that each metal level would support significant enrollment volume; the benefits were envisioned to provide a reasonable range of values for consumers to choose, with roughly a 20% price differential between each metal level. From a consumer standpoint, there was intended assuredness that premium relationships would only vary based on benefit value and consumers would not be financially penalized for unwittingly choosing a plan that was priced higher because of enrollment dynamics and the population that enrolled in that plan.

Of course, things didn’t turn out that way and consumers noticed. By 2017, enrollment in silver plans had grown to a whopping 71% of the marketplace due to the unbalanced price relationships. Less than 1% of enrollees were in platinum plans and enrollment in gold plans was very low as well. The lowest-priced bronze plans were sometimes the preferred choice of the quickly shrinking unsubsidized population. The silver concentration would have continued to grow if not for a regulatory change in 2018 which raised silver premiums relative to other metal levels; that change was the end of the federal government reimbursing the cost of CSR benefits and it caused the actuarial value (or plan liability) of silver plans to increase; “Actuarial value (AV) means the percentage paid by a health plan of the percentage of the total allowed costs of benefits”.

The use of non-prescriptive rating factors was not exactly an actuarial secret. As states became concerned about “bare counties” in rural regions, they enticed insurers to remain, and the early posture of rigorous rate review had softened. In 2017, the Congressional Budget Office (CBO) acknowledged that health status rating in ACA marketplaces was a presumption in its projections and premium relationships were expected to change as metal level risk mix changed.

Coming to Grips with ACA Rating Noncompliance

I read the CBO report as soon as it was released; I was particularly interested in it because my actuarial friend Rowen Bell had clued me in that it “made me look like a prophet”; he had read my earlier policy assessment. But I must confess…I glossed over the acknowledgment of health status rating when I read it. In fact, I was somewhat incognizant about the level of ACA rating deviations until 2018. As I retroactively explained in 2020, “In my work, I have found answers that demonstrate undetected noncompliance with ‘Protections for Pre-Existing Conditions’ and ‘Silver Loading’, and I was not even asking any questions. In fact, it took me a longer time to reach these conclusions, because, like you, I innately but naively presumed compliance because that is what I had always been told. I wanted to believe the ACA assured nondiscriminatory ‘Protection for Pre-Existing Conditions’, but the?math?told me otherwise.”

My recognition of the significance of the misaligned premium problem arose through analyzing premium relationships in a consulting engagement; it resonated when a prominent actuary and state official told me, “We’re not going to enforce the law” and “every health plan has justifiable reasons to do something different than what the law prescriptively requires”. That conversation changed my life. To put it bluntly, there are people who liked me before that conversation who do not like me anymore. And probably vice versa. I love having actuarial friends, but being an actuary is not an occupation; it is an allegiance to principles. I will never compromise being an actuary for the sake of having friends who are actuaries.

After that conversation, my curiosity was piqued. A colleague and I began reviewing 2017 and 2018 premium relationships across the country, building market landscape models, sharing detailed state-level competitive comparisons available from public data, and talking to anyone who would give us the time. We had insights to share and we were hungry to learn what was going on in every state, and we did. We talked to at least one party in about 35 different states and noticed consistent patterns and some unique outliers. Some people with a one-state responsibility were shocked to hear about different dynamics in other states.

?Representatives in most states shared our concerns. We also spoke to people who believed the noncompliant environment was necessary, and we learned their perspectives and recognized their rationale. We had a firm grasp of how ACA individual marketplaces were working. We knew the words people would say, but more importantly what they really meant. Sometimes it was funny; “The risk adjustment methodology is so unreliable that we had to start calculating induced demand factors.” How do you do that? “Oh, we normalized the data using the risk adjustment results.” And that never struck some people as odd.

In our research, we also learned that a few states had formed similar rating compliance concerns and had implemented rules aimed at returning to 2014-2015 era rating compliance. We recognized that premium relationships in these states and also federally-reviewed states (states which didn’t have effective rate review processes) generally had premium relationships that appeared to be more in alignment with coverage generosity.

Through it all, I was troubled on multiple levels. To borrow a catch phrase from President Obama, I wanted to say this to actuaries: This is not who we are. I internalized this trouble for months before I said anything publicly. Here’s where my heart and head were: the ACA is the most monumental health reform in our lifetime and actuaries had a fundamental responsibility in its implementation. The overarching goal of the ACA was to reduce the nation’s uninsured rate and the law was intended to do this through two primary channels; the expansion of state Medicaid programs through enhanced federal funding and a redesigned individual marketplace with income-based, priced-linked subsidies. I refer to the individual market as “the market of last resort” as it’s often the last option before being uninsured and it’s the likely pathway to coverage for many uninsured individuals. Most Americans are either eligible for government programs or have access to employer-sponsored insurance through their work or a family member.

The individual market has been the residual market and it has historically been disadvantaged. Enrollees generally had to purchase insurance with post-tax dollars without any third-party (government, assistance); you might have heard that health insurance is expensive. They also had to go through a medical underwriting process.

While the ACA is a large law, the primarily responsibility of actuaries is assuring rating compliance with the single risk pool requirement. It is our responsibility because we are the professionals with the technical expertise to assess compliance. Most actuaries I talk to say we have failed; they primarily fault state regulators rather than health plan actuaries. It is true that if rules are not properly enforced, there is a competitive need to align premium relationships with the marketplace. Collectively, we became satisfied with a marketplace where premium relationships did not reflect coverage generosity, where enrollees did not receive their entitled benefits, where the ACA’s overarching goal was constricted by our actions, and where our professional integrity was compromised; and despite our platitudes of transparency, we refused to acknowledge any of this.

As portrayed in a recent professionalism session, I reviewed a rate filing a few years ago where a new market participant had developed compliant premium rates following ACA methodology, but then added arbitrary “market adjustment” factors to realign premium relationships. While rating noncompliance is professionally problematic and an issue which should independently concern actuaries, I recognized that other stakeholders would take an interest in rating noncompliance due to adverse consumer impact. I have wanted actuaries to get ahead of this. As part a group of concerned actuaries and other stakeholders, we sought conversations with actuaries who have influence over actuarial governance; for years, we have been consistently rebuffed and ignored. At the same time, deceptive messages have publicly resonated and our corrective transparency about rating compliance concerns has led to personal attacks by methods that you would find horrifying.

To put this in practical perspective, the ACA’s overarching goal of reducing the uninsured rate has been stunted by rating noncompliance. Texas, the state with the nation’s highest uninsured rate, began enforcing rating compliance in 2023 after unanimous legislation passed in 2021. An actuarial study concluded rating compliance would lead to 216,000 more people being insured and “an additional $1 billion federal marketplace subsidies”. President Biden has been bragging on 2023 enrollment, but most of the growth is from three states: Florida and Texas where premiums have become more aligned, and Georgia where his administration is shutting down the new marketing infrastructure.

To be clear, actuaries have been responsible for rating noncompliance and actuaries have been responsible for addressing it. Collectively, we have ignored, downplayed, and covered up the concern despite repeated warning that other stakeholders would eventually call us out. We remained outside the direct criticism until we directly encouraged it with meandering narratives about CSR Defunding changing applicable rating practices beginning in 2018.

As an actuary who has advocated rating compliance and hoped to shield the profession from such criticism, I share in this defeat. But it’s not for a lack of effort. As an athlete from a losing sports team or a political candidate might say, “I left everything on the field”. It’s now time to assess where we went wrong in an environment of open dialogue; many actuaries have real insights here, but they are afraid to share their experience in the now volatile environment and are aware of the vile treatment that has been accorded to those who have sought more transparency. The damage-control whispering among the actuarial elite and indirect encouragement of not speaking about this concern needs to cease; transparent actuaries are not the concern; transparent actuaries are the advocates seeking to protect the profession from the incoming damages that not addressing the concern will attract.

Another understandable and unfortunate problem of living in a noncompliant environment is its gradual acceptance and humanistic drifting toward beliefs that the indelible law must reflect accepted practices. Falling into that belief pattern dangerously leads to wild, nuanced and often pointless justifications rather than straightforward actuarial interpretation when challenged with the law’s actual requirements. That is clearly where we are today.

ACA Obfuscation

I have worked with many different health products in many different regulatory environments and the ACA individual marketplace is unique in many ways; the one that bothers me most is that we don’t tell the truth about it. Some of this is due to its convoluted, paradoxical mechanics. It’s also politically sensitive, we have a politically-based media, and the real dynamics do not always neatly align with political narratives.

I started writing about the ACA 10 years ago. It was partially prompted by an interview with a “policy expert” in the Society of Actuaries newsletter Health Watch. The “expert” claimed that ACA premium subsidies would primarily benefit young adults, and that was too much for me to stomach; since implementation, both federal and state efforts have sought to remedy the ACA’s young adult inequity. As I said about the ACA in 2016, “the majority of comments that have reached a general audience are not from objective sources and have obfuscated public understanding; in fact, it was the repeated misperceptions of the legislative impact that initially piqued my interest in writing about the program details.”

ACA dynamics are not understood, mostly because we go out of our way to make them confusing. There is a deliberate “lack of transparency” intended to fulfill selfish goals. As Thomas Sowell puts it, "the reason so many people misunderstand so many issues is not that these issues are so complex, but that people do not want a factual or analytical explanation that leaves them emotionally unsatisfied." At some point, actuaries decided to be nontransparent about the ACA’s clear single risk pool requirement, but I never got the memo.

New Calls for Rating Compliance

There have been repeated calls from non-actuarial stakeholders to the Biden administration to address rating noncompliance with the ACA’s single risk pool requirement. This makes practical sense. While the policy goals might not align with the campaign-style rhetoric, President Biden has demonstrated a posture more receptive to providing equitable benefits to ACA consumers than President Trump. We should not forget, however, that it was President Trump who issued an executive order in support of adherence to rating compliance with and said “it’s time the people of our country are properly represented and properly taken care of”. President Biden has mostly avoided the rating compliance concern but will likely need to address it due to the recently heightened discussion.

Before his inauguration, President-elect Biden was encouraged to “Realign metal-level premiums to fit coverage generosity…This underpricing of silver plans cuts APTCs, which are based on the second-lowest silver premium. And the overpricing of gold plans puts coverage with relatively modest deductibles out of many people’s reach. By updating risk-adjustment formulas and encouraging states to enforce basic requirements for setting premiums, federal officials can fix this misalignment and save money for the vast majority of people who are covered through the individual market.”

In September, a letter from a large patient advocate conglomerate to the HHS Secretary said “it appears broadly to be the case that premium rate-setting in the individual market has strayed from these rules. The upshot is that plan premiums and plan benefits are often badly misaligned: the premium price of a plan routinely does not reflect the value of the coverage being offered. Silver plans are aggressively underpriced, while gold and bronze plans cost more than they should — more than is actuarially justified or permitted by law.”

In November, I said (certainly not the first time) to no avail, “ACA rating compliance is most prominent in states that have implemented prescriptive rules & states which undergo review at federal level. There are new calls for broader federal enforcement. IMO, actuaries need to lead here, not be dragged into compliance.”

Around the same time, the related self-regulation risk of permissive non-compliance was a topic on a podcast discussion between two actuaries. The discussion followed an American Academy of Actuaries letter to CCIIO which advocated for the use of “specific experience” in plan-level adjustment factors. Such a process is not permitted by law, but the letter argued that the rating rules did not apply to the portion of premiums that were based on the additional plan liability resulting from CSR Defunding. Further, the letter disparaged states and their actuaries who had implemented rating compliance rules on the grounds of “actuarial soundness” of a “CSR Load”, a manufactured factor designed to adjust premium relationships outside of the law’s allowable adjustment and to which the letter had ascribed a “stated purpose”.

The letter’s argument shifts between this pseudo-compliance and justification for extra-legal practice, noting the “obligation” to deviate from the law for actuarial reasons. “Actuaries are typically required to follow laws, regulations, and guidance provided by government authorities. However, as financial stewards of our public and private insurance systems, actuaries aim to produce accurate estimates of revenues and liabilities associated with various risks. With regard to CSR loads, this obligation requires actuaries to use actuarially sound methods when such methods are available”.

These “methods are available” in a relaxed regulatory environment, and as discussed, there is actuarial rationale to deviate from unenforced rules and align rating slopes with competitors; but there is a big difference between a health plan actuary making that decision for his/her employer and the actuarial body responsible for professionalism recommending such an environment over enforced compliance. The Academy’s underlying motivation, which reflects the direct sentiments of a 2021 group who unsuccessfully resisted state rating compliance efforts, has remained undisclosed. The stated reason of “actuarial soundness” is logically understood in the context of premium relationships and current market practice; it is illogical in the sense of a deviation for a small portion of some plan’s premiums in an otherwise compliant environment.

The professionalism concern for health plan actuaries is enhanced when it is unclear what rules will be enforced, as is generally the case. The letter suggests that practical compliance is determined not by the letter of the law, but rather what is “deemed appropriate” by federal regulators. Common allowances of “they can tweak their rates but they can’t go to far” are never in writing as regulators may like their opinions of what should be permissible but they like their job security more. Health plan actuaries are left speculating what rules are being applied as the federal law is not consistently applied; rather, they have to guess what will be “deemed appropriate” in the different states where they develop ACA premium rates.

When asked to address concerns with their letter, the Academy authors did not respond and “the authors proceeded to publish a Health Affairs?article?where they continued to mischaracterize the approach taken in New Mexico and Texas”.

Remarkably, the referenced article paints a picture of an idyllic marketplace where premium levels are objectively appropriate and developed in direct compliance with ACA rules before and after CSR defunding action.?The 3000+ words you just read about historical ACA rating dynamics…’let’s pretend none of that is true for the sake of discussing how we account for a manufactured factor that represents a small portion of the premium in one of the four metal levels. Let’s also pretend that states taking compliance action to holistically align premiums with ACA rules are really upsetting a compliant environment by nefariously adjusting plan-level factors for non-actuarial reasons’. It’s an unwarranted and false characterization of appropriate state actions intended to align with federal law. ??

In 2020, I acknowledged that it be unfair to expect a court to fully grasp the ACA rating dynamics; “It is unsurprising that the court is unaware of the degree of scrambled premiums in ACA markets”; in 2022, it is not only surprising that the American Academy of Actuaries is unaware of current rating dynamics while offering extra-legal policy recommendations; it is difficult to comprehend. The omission of current rating practices in a discussion about rating compliance is inexplicable.

It is a clear effort to deflect an important conversation (a conversation that non-actuarial stakeholders are having and recognizing our deficiencies) to discuss a straightforward premium adjustment that the authors would like to make complicated. The proper way to account for CSR Defunding is naturally intuitive and has always been clearly understood. All of the federal guidance and actuarial literature from 2015 to 2018 placed the increase in actuarial value in the…no surprise here…allowed actuarial value adjustment rather than the other four allowances.

Recent webinar discussion from the authors that “guidance was ambiguous and not remotely helpful” is specious. Across the country, actuaries placed enhanced actuarial value stemming from CSR Defunding in the actuarial value component of the applicable rating worksheet without giving it a second thought. The authors want to argue that the item of discussion is how these “additional costs” are calculated in the actuarial value adjustment; that is not the concern at all; the rating compliance problem is in the core of how the actuarial value was calculated before CSR Defunding was a consideration. The entire discussion about “Paying for CSRs” is an unhelpful distraction in the rating compliance discussion.

?In The Crosshairs

The deflective discussion has brought consequences. While actuaries have obviously been involved in both the processes of developing and reviewing ACA premium rates since program implementation, our profession has largely remained outside of the direct aim of any public criticism; that changed Friday.

Stan Dorn and Timothy Jost, two highly respected ACA policy giants, authored a Health Affairs article which claims actuaries representing the American Academy of Actuaries advocate a rating approach which creates multiple risk pools and lets insurers “find ways to segment the market into separate risk pools and charge differential premiums based on segmented risk, a de facto mechanism for underwriting”; this “yields the precise result CCIIO sought to prevent with the single-risk-pool regulation”.

The esteemed authors also highlight consumer impact and health equity concerns. “Health equity concerns are implicated as well…good policy outcomes cannot justify federal legal violations. But in this case, the law and the good align: strictly enforcing ACA pricing requirements can yield significant savings for consumers, especially in communities of color.” This is a concern I had also publicly and privately expressed in the last year.

?A Lost Cause

I barely missed breathing the fresh (or perhaps smoky) air of the 1960s. I can make a chronological argument that I was conceived at Woodstock but the evidence ends with the timeline. If you know me, you might find this notion funny. If you have ever met my parents, you would find it even funnier.

My understanding of the 1960s era culture and military conflict in Vietnam has never been refined. I was born too late to appreciate it through my lived experience, and frankly the subject never captivated my interest. Like many people reading this, I grew up an accomplished mathematics student and mastering the history of national conflicts never fit neatly into prerequisites of solving the problems I was interested in.???

While not paying close attention, I would hear things and notice distinctions between American military conflicts. When people talked about most wars, the subject was our national interest or geo-political accomplishments. When the discussion was Vietnam, I usually heard stories about losing a friend or a family member. The war was often characterized as unwinnable war and a conflict without a mission.

The deflective “Paying for CSRs” discussion strikes me as a Vietnam-like hopeless endeavor. I do not understand the targeted end game; the short-term result is confusion and delayed compliance. It is clear to me that the ACA rating compliance concern will end in one of two ways. We will change rating practices to comply with the law or we will change the law to comply with desired rating practices. Deflective conversations cause confusion, delay rating compliance equilibrium and cause professional harm. Several states delayed rating compliance efforts in light of the deflective CSR discussion. CCIIO appeared poised to make risk adjustment refinements for plan year 2024 to better align with rating requirements; that appears to be delayed for another year.

The risk adjustment discussion is also a deflective rating compliance item. To be clear, rating relationships should reflect benefit differences; risk adjustment results is not an allowable rating adjustment. A section title “Risk Adjustment Data Suggests CSR Loading May Not Even Be Required” is troubling. Risk adjustment methodology is developed based on required rating rules; plan adjustment factors are based on benefit differences, not claims-based experience of what is ”required”.

Matt Fiedler, whose paper the Academy authors cite as a policy recommendation to restore CSR funding, advocates not enforcing the single risk pool requirement and believes in selective regulatory enforcement with a “responsibility to choose among enforcement strategies based at least in part on their consequences.” This may appeal to some people in some circumstances, but there is significant actuarial danger here. Do actuaries want to assume the professionalism risk of undefined rules which vary by regulator preference where consumers’ entitled benefits are diminished by such decisions? Is our requirement in ASOP No. 12 to comply with applicable law interpreted as complying with what regulators “deem appropriate”? How does this interpretation apply to actuarial regulators? Effectively in practice, this means state regulators decide what the law is in a federally deferential environment, the same state regulators who will not put “the law” in writing out of fear of being overly official with a manufactured interpretation of the law reflecting personal opinions. In my opinion, this?is an unforced error inviting retraction of our self-regulated privilege. I am surprised that we have arrived here despite years of warning calls being ignored.

The Academy authors purport to be single risk pool compliance advocates, but all of their ire has been directed toward compliant states. If we do some rough math and assume there are three compliant states and “CSR costs” are 5% of the claims, their focus is on changing .3% of costs to reflect experience rather than the single risk pool rather than changing 99.7% of costs to reflect the single risk pool rather than experience. They have not objected to the noncompliant rating practices practiced since 2016, but objection to compliant rating practices was generally immediate.

They support restoration of CSR funding which is an area where actuaries generally do not have influence. If CSR funding is restored and their actuarial soundness concern with the single risk pool is removed, the result of their efforts will have been preventing states from rating compliance.

Their legal argument is two-fold. The first part is that CSR-eligible enrollees are enrolled in the “base plan” (presumably the standard plan in the regulations) and receive CSR assistance outside of benefits. This appears intended to support the rating deviation; the regulatory text says enrollees are in a silver plan and assigned benefits based on income, so the new legal opinion is questionable. It's also contrary to prior literature. Notably, this was a new legal argument in 2022 to protest state action that relied upon a federal law in 2010, federal expectations in 2015, and federal guidance in 2018. It seems that a genuine legal concern would have been expressed years earlier, and this position has been launched to challenge state compliance efforts.

If this argument had merit, it would effectively prohibit “silver loading”. Instead, the Academy authors want to apply experience rating practices to their "CSR Load", which reinforces the same rating deviations which have been commonly practiced since 2016.

Their framing of the discussion of experience data / issuer pricing models versus federal actuarial value levels is strange. ?That’s not the applicable discussion at all; the tension is between using (noncompliant) specific experience data and (compliant) issuer pricing models based on single risk pool. I know of at least one state which has proposed the “federal actuarial value” based on the Academy’s introduction of it into the discussion.

The Academy authors end their article by suggesting “the calculation and application of CSR loads” is the problem to be solved and can be alleviated by restoration of CSR funding with a potential legislative subsidy enhancement. The “CSR Load” is not a serious concern; it’s an actuarial value adjustment. The problem is rating noncompliance which existed before CSR Defunding, after CSR Defunding, and will still be present if CSR funding is restored; the funding of CSRs is not a serious part of the rating compliance discussion.

The authors claim that CSR restoration would “allow regulators to focus on the core actuarial concern of ACA rating: compliance of rates and rating practices with the single risk pool requirement.” The focus on rating compliance has not drifted due to the defunding of CSR payments. Arguably, CSR Defunding has resulted in more transparent of exposure of rating noncompliance and catalyzed regulators to enforce single risk pool compliance.

The rating compliance distraction is not CSR Defunding; it is the deflection of the rating compliance concern to an artificial world of made up words, manufactured factors and ascribed purposes, construction of novel legal positions to support extra-legal rating practices, disparagement of compliant states and their actuaries, puzzling accusations that the federal government has confused actuaries on single risk pool rating compliance, and pontification that “spreading costs” across a subset of similar plans satisfies the single risk pool requirement despite the Academy’s consistent position and specific postulation that “insurers must pool all of their individual market enrollees together when setting the prices for their products” so that “costs of the unhealthy enrollees are spread across all enrollees”. The disparagement of states which enforce the pooling of all enrollees in the development of plan factors includes an obviously deliberate omission that these efforts are clearly intending to foster federal rating compliance, efforts that are directly understood from both the words and the clearly understood impact.

It is past time to recognize that there is no efficacious outcome associated with the “Paying for CSRs“ deflective narrative and we should cut our losses, end this embarrassing spectacle, protect our self-regulation status and return to our actuarial home. Today is the final day to submit comments on the 2024 Notice of Benefit and Payment Parameters. The American Academy of Actuaries should retract its ill-advised “Cost-Sharing Reduction Premium Load Factors“ letter which has no discernible positive outcome, remove the inexplicable clutter that has been added to the rating compliance concern, and suggest that CCIIO promote basic rating integrity that is free of extra-legal artificial constructs, joining other actuaries who have advocated rating compliance since 2016. This responsible action will remove the newly acquired ammunition of the noncompliance advocates in state insurance departments, diminish the actuarial division that this misguided war has fostered, and “allow regulators to focus on the core actuarial concern of ACA rating: compliance of rates and rating practices with the single risk pool requirement”.