Fourteener Fortitude: ACA Markets Rising Above the Fray

“One type of athlete that you can hire is guys that have climbed Mount Everest. And they go and talk to like businesses to motivate ‘em…because it’s relatable.

It’s not relatable at all. This guy climbed Mount Everest and he’s going to try to talk to people that are trying to park as close as they can to the building.” ―?Nate Bargatze

In mountaineering parlance, a “Fourteener” is a mountain peak that exceeds 14,000 feet in elevation. There are 96 such locations in the United States, and 75% of them are in either Alaska or Colorado. I snapped a picture of the highest one while in Alaska in 2017. Having grown up in South Carolina where the highest point is just over 3,500 feet, the view of the dark rocky mountain contrasting with the light-colored clouds was a majestic sight; but this flatlander had his glimpse too low. Above the clouds is the real mountain, covered by white snow and camouflaged as another cloud to the eyes of novice mountaineers like me. At first, I didn't know where to look. I simply was not open to the consideration of seeing land that high. It was not relatable.

ACA Obfuscation

For most Americans (including most health actuaries) who digest information about the Affordable Care Act (ACA) from the political media, the real dynamics are not relatable because our sphere of understanding is limited. We lived the four years of Donald Trump’s presidency being bombarded with discussions of the policy details in phantom legislation and misrepresentations of the danger of unimpactful court cases while the substantive action on the regulatory front was ignored. The misplaced media focus raised the priority of communicating honest objective substance. As a fun way to promote clarity around the real market environment, I ranked the first 10 years of the ACA on the law’s 9th anniversary and discussed the changing dynamics and the “real story” on an actuarial podcast.

A year and a half later, I followed up with a 12-year ranking when the 2021 premium landscape was available just before the 2020 presidential election. I began, “Ordinarily we would need to wait on open enrollment results to be certain, but we can go ahead and make the call.?2021 will be the best year for the Affordable Care Act (ACA); the government report released yesterday tells us what we need to know. It took twelve years, but 2021 is the first year that state action has significantly improved ACA markets, and that deserves acknowledgment”. Again, this was written in a communicative environment where the “real story” was not discussed in public policy circles, as a health reporter from the Washington Post astutely and courageously echoed.

I concluded the 12-year ranking of the delicate market framework with a clear warning, “Look at the ACA landscape via a reasonable assessment of objective measures. You will recognize that health insurance for lower-income enrollees will continue to become cheaper each year as markets move toward the new equilibrium. You will reach the same conclusion that I did; ACA markets are stronger than they have ever been and 2021 will be the ACA’s best year. It took us twelve years to get here; this is where we want to be; let us understand where we are now and where we are going, and let us not do something stupid to mess this up.”

Doing Nothing at All

As I explained to Insider at the time, "one of the best courses of action that Trump could take, if reelected, would be to essentially do nothing for a while, and let the market mature: Insurers are coming back to the market, premiums are declining. If we leave the ACA alone, it's going to continue to get better. Let's just leave this thing alone until we understand what's going on." I had reason to be concerned; we did not "understand where we are now and where we are going". During a phase of improving marketplaces eight years after the monumental health care transformation, my profession was cautiously preparing for "What’s Next?".

My sentiments were not new. On the March 2019 podcast, when asked about election-induced federal legislative changes, I expressed hope for hesitation: “If you look at the market right now, people like it more … premiums are down in 2019 … things are happy … there’s more opportunity for states. The best thing for the federal government to do right now is just ‘do nothing’ and leave things alone. Of course, you’re not going to have a presidential candidate with that campaign platform.”

But what if you did? It would likely be ridiculed, and that is exactly what happened. During a 60 Minutes interview, President Trump's press secretary delivered "his health care plan". According to 60 Minutes' Lesly Stahl, it was "filled with executive orders and congressional initiatives, but no comprehensive health plan". There was no logical rationale to expect Congressional legislation as the president's related comments were the "Supreme Court has just provided 'powers that nobody thought the president had'”. But the book of “empty pages” and a health policy campaign platform of achievements rather than new policy placed Trump rather than Biden as the real ACA status quo candidate. The public persona differed from the hard reality beneficial to ACA marketplaces. President Trump would "not portray himself as a ‘less action’ 2nd term candidate, but that is the right health policy?prescription?with a backlog of regulations waiting to be fully implemented by downstream stakeholders".

A few months before the 12-year ranking, I was asked to write about the ACA perspective in a ‘health care crisis' themed magazine edition. I knew exactly what I would write and never wavered: There is no current crisis; “the best way to elude a health insurance crisis is to avoid starting one”; but the temptation to “enact large changes in laws is always present”.?

More ACA Obfuscation

And right on cue, the new president, who left Washington, DC when the ACA was in deep trouble and returned to inherit an improved ACA marketplace at record strength, immediately went to work “to undo the damage that Trump has done", while absolving himself from crisis-inducing association, noting there is “nothing new that we are doing here other than restoring the Affordable Care Act". The damage reversal characterization was not altogether surprising; five months earlier I had predicted candidate Biden would not acknowledge that "ACA markets have grown stronger since 2016", would "hide that?more?people have been helped and fewer have been hurt" in recent years, and will "try to portray a weakening marketplace without a like-minded leader at the helm".

Joe Biden's campaign?platform (purportedly pro-ACA) of changing premium subsidy calibration from silver to gold and poaching core ACA market enrollees by adding a government-run “public option” and?lowering?the Medicare eligibility age was quickly abandoned in favor of supplementing the enhanced silver-based subsidies, albeit temporarily. In reality but of course outside the realm of acceptable public discussion, President Biden's administrative decisions complemented the policy record resulting from his predecessor's actions rather than “undoing any damage”. More transparency was needed.

Last weekend, I decided it was worthwhile to make the annual ACA rankings a biannual endeavor; what do you think about on Sunday afternoons? ?? So here we are again with a new annual open enrollment period and the emerging results of the 2022 mid-term elections. How are we doing as we move into the ACA's fourteenth year in terms of preserving the record gains in fragile marketplaces noted two years prior? Are we rising above the clouds and staying in clear view? The gritty detail of the fourteener ranking is below but first let us summarize. I would love your opinion (seriously, I really would), but here’s my concise one: We have indeed done something stupid, but it's not enough to mess up the strengthened ACA marketplaces.

Background on Annual ACA Rankings

The ACA has broad impact on the health care system, but the endurance of the legislation relies on the sustainability of the individual health insurance market which it fundamentally reshaped in 2014. Accordingly, the rankings reflect individual market success and its outlook. Relevant factors include consumer satisfaction and popularity, enrollment success, flexibility to improve, functioning mechanics, general market confidence, insurer profitability, legal challenges and victories, number of participating insurers, operational aspects and net premium levels.?

Annual Results and Details

The chart below (credit to David Anderson) displays the percentage of enrollees with access to a free “gold” plan (providing roughly 80% actuarial value) in federal exchange states. This detail provides a strong indication of consumer value propositions each year. As Mr. Anderson says and the visual representation suggests, there are some "big WOWS" in 2023.

A second chart illustrates the correlation between Gold/Silver premium ratios and issuer participation; issuer participation began declining with premium misalignment in 2016 but reversed with CSR Defunding (announced October 2017) in 2019, and issuer participation has continued to grow with premium alignment compliance improvements through 2023. A lower gold/silver premium ratio is generally the easiest reference to signal positive consumer value and movement toward premium alignment equilibrium.

A third chart graphically illustrates the peaks and valleys of market performance of the ACA's first fourteen years. Respectively, the three valleys of 2013, 2016, and 2020 are primarily attributable to operational challenges, structural market flaws, and loose regulatory enforcement.?

Descriptions are provided for each year; these descriptions are deliberately brief with more substance for 2022 and 2023; detail on earlier years is provided in the articles ranking the first 10 years and the first 12 years.

#14. 2016 – Troubled market and no cohesive plan to address challenges. Section 1332 guidance promulgated too late and too inflexible.

#13. ?2013 – Disastrous enrollment process. ‘Lie of the Year’ award.

#12. 2017 – High premium rate increases, rampant premium misalignment compressing tax credits. Issuers exited markets.

#11. 2014 – Enrollment implications and skewed market in public view. New Health and Human Services (HHS) Secretary with less animus toward the insurance industry.

#10. 2010 – Divisive and contentious legislation. President Obama said that his health care overhaul would “protect every American from the worst practices of the insurance industry.”

#9. 2011 – ACA’s most quiet year. American Academy of Actuaries stated the individual mandate (or an alternative mechanism that would “encourage broader participation”) was essential. Plaintiffs in Texas v. Azar (2018) referenced the Academy’s position in their arguments against severability.

#8. 2012 – ACA survived monumental court challenge NFIB v. Sebelius. ACA supporters energized by court ruling.

#7. 2015 – Cautious optimism as operational aspects had been fixed and many insurers who took a ‘wait and see’ approach in year one participated in year two. Second Supreme Court battle won, related to subsidies on federal exchanges.

?#6. 2018 – ACA makeover led to largest and swiftest annual market improvement and surprised the "experts". Insurer profitability skyrocketed to record levels.

#5. 2020 – The fourteen states at equilibrium pricing had notably smaller populations, but the market improvement relative to pre-2018 was evident. Political historians will remember 2020 as the year Congress neglected its basic duty of remedying an unconstitutional law, one that could easily be fixed without disrupting the law’s operations. Actuaries, attorneys, and left-leaning policy experts called on Democrats, particularly Speaker Nancy Pelosi, to stop the election-year politicization of the ACA and sever the inconsequential (without a penalty) individual mandate, rather take an unnecessary gamble with the Supreme Court. Instead, the political benefit of an active court case was prioritized over a basic function of Congress. This unnecessarily left a black mark on the law and its purported supporters.

#4. 2019 – After a mass exodus in 2017 and 2018, insurers returned to ACA markets in 2019. ACA premiums were lower for the first time and continued to decline in each of the four years President Trump wrote the annual ACA regulations. 2019 is remembered as the year that helped those most harmed by the ACA. While the 2018 CSR action significantly boosted financial assistance for lower-income consumers, it did nothing to help people ineligible for premium subsidies, the group most harmed. David Anderson aptly calls these people “the only ones without help”. As consumer value improved within ACA markets and flexibility was extended outside ACA markets, Americans acknowledged more help and less hurt.

#3. 2021 – The original expectations for 2020 came to fruition in 2021. Premium rates were better aligned and consumer value was higher. Rather than promote the Annual Open Enrollment period as was customarily done, President-elect Biden continued to champion his campaign commitment to a "Special Enrollment Period" which effectively delayed much of the 2021 enrollment until mid-year.

Focused rate review?in state marketplaces significantly improved ACA markets. Historically, “rate review” had been focused on what some refer to as the “newspaper number”; that is the average percentage change in gross premiums, but it has little relevance to what most consumers pay. ACA premium subsidy dynamics are convoluted and most consumers receive financial assistance; their premiums are based on their income and the relation of the plans they buy to the benchmark plan. Without focused rate review, benchmark plans are often priced lower than they should be while other plans are likewise higher. This harms consumers two-fold as the premium for their plan is higher and the subsidy-determining benchmark plan is lower.

More states were utilizing focused rate review in 2021 to crack down on Metalball, the practice of violating the ACA’s anti-discriminatory tenets and utilizing population characteristics rather than plan design to differentiate premium rates.

#2. 2022 – The boosted premium subsidies from the American Rescue Plan Act and the absence of 2021 open enrollment shenanigans contributed to a strong 2022. Colorado leveraged 2020 legislation to “assure premium pricing that complies with the requirements (modified community rating) in the federal act” while New Mexico recognized “premium rate relationships are misaligned in the individual market” and implemented new “pricing guidance to clarify rules and eliminate subjective variability in pricing factors and the use of other plan adjustments”. Premium corrections in New Mexico resulted in immediate consumer value and enrollees?migrated to higher value gold plans, as "consistent and rigorous adherence to ACA insurance rating rules" required "each metal level’s premium to reflect the statewide characteristics of all individual-market enrollees" rather than "plan premiums based on the characteristics of the people who were expected to enroll in each metal-tier level".?

New Mexico enrollees not eligible for generous CSR subsidies migrated to gold plans, similar to what Wyoming, a federally-reviewed state with immediate market equilibrium, experienced in 2018. As previously implemented in Pennsylvania, New Mexico also promoted issuer equity by requiring the same price relationship between on-exchange and off-exchange silver plans, thereby not allowing distributional CSR variants to create competitive advantages?and to?“foster the development of markets where health plans compete on quality, efficiency, and value, not on risk selection.”

As displayed in the table below, the resulting 2022 premium relationships in New Mexico and Pennsylvania (blue background) were neatly sandwiched between the rate relationships of the three states which undergo federal rate review (green background). This is a worthwhile comparison as health actuaries have recently asked HHS personnel for perspective on rate relationship disparities between states. While declining to endorse certain state enforcement actions or to suggest appropriate numeric relationships, HHS personnel have responded that the federal government remains deferential to effective rate review states while expecting rate relationships to be “reasonable and actuarially justified”. The rate relationships in states like New Mexico align with the original HHS expectation (of a defunded CSR environment) that on-exchange silver plans would be priced at an actuarial value of 90 percent or 94 percent and guidance that “the CSR load on silver level plans only can make a plan level adjustment based on actuarial value and cost-sharing design of the plan related to loading.” While most states still have Gold to Silver ratios higher than 105%, a minority of states have Gold to Silver ratios at or below 101%, including states which have implemented premium alignment rules without enforcing issuer equity (purple background).

2022 Premium Relationship of Gold and Silver Plans

#1. 2023 – Further premium alignment continued in 2023. The most obvious place to start the 2023 discussion is in the nation’s second largest marketplace. Texas implemented effective rate review, “thanks to a lot of hard work by a group of actuaries & legislators of all ideological stripes”. The specific rating rules arise from lawmakers unanimously?supporting the catalyzing legislation. Like Pennsylvania and New Mexico, the Texas rating rules enforce issuer equity. Other states also showed favorable changes in rate relationships, notably Florida, Tennessee and West Virginia.

Stakeholder recognition of the benefits of compliance improvement, rating rule clarity, and improved market environments have led to recent calls for national adoption of premium alignment enforcement.?In a Health Affairs blog post, authors from Families USA encouraged President Biden 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.”?In evaluation of the 2023 premium landscape, respected insurance broker Louise Norris said, “Texas made a great change this year, requiring insurers to add the cost of CSR to silver-plan rates w/ a uniform 35% load…A few states have similar rules, but it would be great to see nationwide.”

ACA stakeholders await federal directives for stronger rating compliance; it is unclear how the Biden administration will respond. In a speculative effort to read tea leaves of the Biden administration, it is useful to consider past actions. Despite the “undo Trump’s damage characterization”, President Biden has aligned himself with President Trump on the two administrative decisions in the table below where President Trump had differed from President Obama. Interestingly, President Biden changed policy on the two items where President Trump did not. So maybe it is really President Obama and not President Trump with whom the current president has substantive policy disagreements? President Biden’s decisions thus far have generally aligned with improving marketplaces and consumer value. On the other hand, President Biden has shown less respect for direct compliance with the law than his predecessors. For example, the Biden administration's decision to go where his predecessors would not and write new regulations to avoid the "family glitch" will provide better consumer value but it will likely also attract lawsuits.

While the Biden administration signaled affirmation of rating compliance with "clarification that plan level adjustments should follow single risk pool guidelines and should not reflect the enrollees specific to the plan or metal level" in the 2023 Unified Rate Review instructions, the reiteration of the law's requirement was removed, and the Biden administration has since remained silent on single risk pool rating compliance. Notably, President Biden has differed on the two areas where Presidents Obama and Trump were aligned, demonstrating a willingness to take different positions than his predecessors.

The single risk pool compliance deviations have drawn more attention as larger states have considered stronger compliance, Texas in 2023 and Illinois in 2024. State activity will likely continue on a piecemeal basis, and without a major policy shift or clarification on compliance enforcement from the Biden administration, ACA stakeholders should expect continuing gradual marketplace improvement post-2023, fueled by both state regulatory action and natural migration toward market equilibrium. If current trends continue, we should expect 2025 and 2024 to replace 2023 and 2022 as the ACA’s two best years when we revisit the annual ranking just before the 2024 presidential election.

Dark Clouds at the Peak

While the peak can be clearly seen, a large portion of the mountain is obscured by clouds. As ACA markets move into their best year and general compliance with the single risk pool rating rules improve, several actuarial voices have expressed resistance to the improving market dynamics. As ACA marketplaces will continue to improve if left alone, it is incumbent upon actuaries to consider whether we are now part of "creating a crisis".

Nick Zornosa, a CIGNA Business Finance Officer, was interviewed in May on a SOA Health Section ‘Premium Alignment’ Podcast. He?referenced President Biden’s pivot away from Open Enrollment integrity as a troubling destabilization; "the state of the exchanges is getting fragile again. The Biden administration had opened the enrollment window in 2021 in a significant way that we know created industry losses. It might make sense to do some of these types of regulatory inventions, to create better deals for consumers in a market that’s more stable…There are only so many disruptions to the market that can you create."????

I have had several conversations with Mr. Zornosa and his perspective is expectedly not unlike other issuer representatives.?Some ACA products are more profitable than others in an aligned premium, single risk pool environment and there is enrollment distribution risk, especially when there is weak regulatory enforcement or lack of enforcement clarity. It makes sense that a Finance Officer of a marketplace issuer would be nervous about enhanced regulatory enforcement. In fact, as I have worked with states to implement appropriate premium alignment guidance, I have recommended that they communicate with issuers early in the process to understand specific concerns. I naturally expected there to be trepidation there, and there has been some, but much less than I expected. I have actually seen more relief around new regulatory clarity and not having to speculate on enforcement levels and competitors' compliance adherence. Surprisingly, the only vocal concerns related to enhanced rating compliance have been brought forth by a minority of regulatory actuaries.

While rating noncompliance is a professionalism concern that needs to be transparently resolved, most actuaries generally try to remain silent regarding this sensitive issue or they deny the challenging reality in public settings, so I appreciate Mr. Zornosa's helpful candor. Other actuaries may agree with his caution in light of Biden's market diversion; personally, I take a “two wrongs don’t make a right” approach and do not believe President Biden's machinations warrant compliance delays. Actuarial compliance is best for the marketplace, consumers, issuers, regulatory clarity and the integrity of the law. If there is a practical limit to the number of simultaneous disruptions a market can accept, consider the Texas experience in 2023. The state with the second largest marketplace switched from federal review to state review, had it actuaries review ACA rates for the first time, implemented focused rate review to enforce premium alignment, and reconfigured its rating area framework to attract greater competition in rural areas. It's poised to arguably have the strongest ACA marketplace in 2023. From my vantage point, transparency, strict compliance of the law, and regulatory clarity have been the recipe for success in ACA marketplaces for consumers and issuers alike, and delayed compliance does not serve any ACA stakeholders.

To his credit, President Biden has respected the integrity of the Annual Open Enrollment period in plan years 2022 and 2023, but his 2021 decision has lingering effects on what health actuaries believe about market improvement. As I said about President Trump, it would be wise for the president to understand that marketplace tinkering may have unintended consequences and it would be advantageous if he would leave the ACA alone and let improving marketplaces continue to strengthen.

While premium alignment concerns from issuers have been anticipated, the unexpected objection to premium alignment compliance has come from arguably the least expected source, the American Academy of Actuaries, or perhaps more precisely, actuaries with access to American Academy of Actuaries letterhead. The American Academy of Actuaries is, of course, the professional organization which “sets qualification, practice, and professionalism standards for actuaries credentialed by one or more of the five U.S.-based actuarial organizations in the United States”.?

The opinions expressed in an Individual and Small Group Markets Committee letter (“Academy Letter”) to Ellen Montz, Director of CCIIO, challenge seven years of legal understanding related to compliant rating changes resulting from the defunding of CSR payments, beginning with the Obama administration’s?acknowledgment that the lack of CSR reimbursements would result in higher plan liability (aka actuarial value) for on-exchange silver plans, and issuers' responses would naturally align with a straightforward understanding of actuarial compliance with single risk pool rating requirements. This was followed up with a Trump administration CCIIO bulletin which placed any such adjustment within the first of five allowable plan-level adjustments delineated in the single risk pool language of the law; “Issuers that have elected to distribute the CSR load on silver level plans only can make a plan level adjustment based on actuarial value and cost-sharing design of the plan.” Every aspect of the Academy Letter has been puzzling to actuaries, including the timing, the unstated challenge to the understood legal interpretation in the CCIIO bulletin, the lack of exposure/comment, the unstated purported legal basis, and perhaps most importantly, the rationale and its presumed beneficiaries.

To be clear, rating compliance has been enforced in some states with effective rate review. Rating compliance has occurred voluntarily in other states. Rating compliance has been effective in federally-reviewed states. The American Academy of Actuaries has not historically objected to rating compliance. The new objection appears to be in response to states implementing specific guidance to enforce federal law; the objection isn’t stated as a general compliance objection; the apparent target is “state directives”.

Rather than discuss compliance with the law, the letter crafts a novel legal argument which centers on parsing consumers’ plan benefits into an “underlying base plan” and additional costs (not benefits); the Academy Letter doesn't dispute the "unsound" nature of compliant rating regarding the underlying base plan, but the parallel "unsound" nature of the much smaller "costs" is purportedly untenable. “The specific plan being provided to the member under the framework of the ACA is the base metallic plan, and the methodology being discussed neither suggests nor requires the reflection of any specific characteristics of the silver CSR population in the pricing of the underlying plan…When the actual costs of CSRs are not aligned with the amount of the CSR load, then premium rates may not be actuarially sound, and actuaries must acknowledge any actuarial unsoundness in the rate filings as part of the actuarial certification in accordance with applicable ASOPs.”

Unpacking this, the Academy Letter purports that an enrollee with a 73% actuarial value plan should be priced using the compliant single risk pool and not “actuarially sound” for 70% of the 73% actuarial value, but the remaining costs of 3% must be “actuarially sound” or actuaries must acknowledge any actuarial unsoundness. Whether it's 73%, 87%, 94% or 100%, carving out a fraction of one metal level's premium to apply experience rating does not change an "actuarially unsound" rating practice to an "actuarially sound" one. The Academy Letter does not address whether it considers single rating risk pool requirements to be actuarially unsound; it only broaches the subject when discussing an artificially constructed rating factor which is neither required nor in the law.

?While not reflective of general actuarial concerns, the only sentiments expressed in the Academy Letter appear to align with the viewpoint of a minority of state regulators who have objected to strengthened compliance enforcement in the states where they have historically practiced. Again, neither the Academy nor practicing actuaries have objected to general enforced compliance in federally-reviewed states, voluntary compliance, or prior state compliance enforcement.

With this unexpected pressure for relaxed compliance enforcement, some stakeholders who have been working toward strengthening local rating compliance are concerned. Health equity advocate Stephanie Becker notes, “In Illinois, racial and ethnic disparities in health insurance coverage and access are reflected in people of color being more likely to be uninsured and more likely to go without care due to cost. In other states, premium realignment has been a helpful tool for lowering cost sharing for low income people. Illinois is currently considering a premium realignment strategy -- which we see as a race equity and health equity issue to bring out-of-pocket costs down for low income people and people of color.” Another prominent consumer advocate viewed the letter as a direct assault on pro-compliance actuaries, “Who knew actuaries could be so nasty and ready to accuse colleagues of bad faith?". This is likely in reference to the letter's departure from the substance of the Academy's prior positions on the single risk pool and the tone of the normally docile organization, which disparages states for newly enforcing compliance as "using an amount known to be inaccurate and inconsistent with reasonable expectations of consumer behavior is not an actuarial assumption, even when this assumption is made by an actuary".

The heart of the Academy Letter is a closing message of "Actuaries are typically required to follow laws, regulations, and guidance provided by government authorities. However,.." with appeals to a "choice of approach" and "different methodologies for calculating CSR loads". The deviation from the law is also a deviation from the limited federal guidance regarding CSR Loading, that "Issuers that have elected to distribute the CSR load on silver level plans only can make a plan level adjustment based on actuarial value and cost-sharing design of the plan". Neither this guidance nor the law’s requirements are mentioned in the Academy Letter; there are a few unsubstantiated references to single risk pool compliance.

As I've heard concerns from other actuaries regarding this letter, two consistent messages have resonated: 1) Actuaries don't need instructions and pages of calculations regarding what is best from a pure actuarial standpoint. 2) This is not an actuarial paper. This is a nuanced legal argument clearly designed to depart from single risk pool rating compliance. Why is the Academy making such a legal argument?

The second point relates to a statutory claim in the first paragraph that silver tier plan variants are not distinctive plans from the base silver plan, e.g. a silver enrollee receiving 87% actuarial value is in the same plan as an enrollee receiving 70% actuarial value. The letter goes on to speak of the "goal of the CSR loading" and "the purpose of a CSR load". Of course, there is no statutory allowance or flexibility to vary plan level premium rates based on artificial constructs. The letter attempts to appeal to those who will the accept the confluence of single risk pool compliance and unallowable single risk pool rating factors being "deemed appropriate by federal and state regulators". This is obviously specious.

The big question of "Why?" remains obviously prominent. Rating noncompliance is harmful to consumers, results in further misalignment, creates risk adjustment problems, leads to professionalism concerns, undermines the integrity of the law, and is wholly out of character for the American Academy of Actuaries.?

?While I have admired countless views of mountain peaks, I have only summitted to 14,000 feet a few times. Mount Adams and Pike’s Peak come to mind. The air is thin, but it is clean. As ACA marketplaces have ascended above the clouds to their highest point in the law's fourteenth year and their height can clearly be seen by those who know where to look, some protagonists are trying to take their oxygen away. So far, they have failed.

As the CBO projected, reaching the summit could take a?decade.?The fortitude of the Affordable Care Act flies above the fray of “various ways to calculate CSR Loads”, and markets are clearer and better value is provided to consumers when rating rules are followed without efforts to obfuscate. Yes, we have done indeed done something stupid and the time to reach the summit may be delayed, but we have supplies for such contingencies (pun not intended for those of you who caught that), and the fortitude of the ACA and advocates of fidelity to the law will prevail. The Academy Letter will not close the trail to the ACA summit, but it will likely cause some hikers to delay their journey.?It is rough weather. It is a freak snowstorm. It will cause confusion and it will hurt real people, but that should not deter us in our noble journey.

ACA marketplaces struggled in 2016 and 2017 as premium misalignment took hold. On a national basis, improved rating compliance has been a slow piecemeal endeavor. Relatively speaking, it has been quiet. States have generally improved rating compliance with little understanding of what they were doing and without wide recognition of the underlying problem they were solving. That has all changed now.

Open letters from powerful organizations are making the case for rating compliance. A recent actuarial podcast offers a realistic viewpoint of the outcome of our failure to self-regulate and highlights our protests while be dragged into adherence with the law, "Why are committees of the American Academy of Actuaries apparently implying that actuaries don’t have to follow laws and regulations when it comes to ACA rating, while patient advocacy groups are warning Health and Human Services that actuaries are not following rating rules?" I understand the second question. Their constituents are being robbed of legally-entitled benefits as the solution is simply enforcing current law. Regarding the first question, I have been deep in the ACA weeds for ten years and an Academy member for twenty-five and I don’t have a good answer. I mean this in the best way: communications from the Academy are generally reasoned, not incendiary and predictable. I'm not used to reading Academy communications and being surprised by anything. I have never seen anything like this letter. Quite frankly, it is not something I can relate to.

Reaching the Summit

In the early years, hiking the ACA mountains was a mix of ups and downs. Since 2016, the trend has been steadily uphill while transparency continues to be clouded; the law is more popular, more issuers are participating, and enrollment is growing. We can learn from the history, and some insightful?voices have provided helpful commentary. In the first fourteen years, notable ACA setbacks have been the operational challenge of exchange implementation in 2013, premium misalignment and the financial challenges along with lackluster interest in ACA markets in 2016, and the 2020 regression during the ACA makeover. Marketplaces have steadily grown stronger since 2020 and rating compliance has improved. Recent misguided efforts to reverse course may slow state compliance action but ACA marketplaces in aggregate will likely continue to be more attractive in each successive year.

Despite unexpected resistance and the dark clouds from newly vocal protagonists, ACA rating compliance and market effectiveness will continue to rise clearly above the fray, and more consumers will receive the benefits they are entitled to under the law, albeit at perhaps a slower pace. Premium relationships will continue to better reflect coverage generosity and the ACA's intentions, regulatory confusion will diminish, and fewer Americans will be uninsured. The ACA might not be everyone’s idea of the best health policy solution, but the welcome trend is a movement toward solutions and away from problems within the current policy framework. Consumers are paying more equitable premiums for health benefit coverage and clouds are parting to expose clearer views of ACA marketplace operations.

Lack of transparency may be a huge political advantage, but health policy dynamics are clearer and marketplaces function better when we rightfully contribute to the public discussion with bold objective honesty rather than harming ACA marketplaces and innocent consumers with acquiescence to accepted societal groupthink. If you lack the fortitude to continue the journey to the peak of ACA clarity, you will hear lies and you will be stuck believing lies. Maybe that's where you want to be; it is comfortable there and you will have a lot of company; but you will miss out on the thinner-air rewards of understanding the confluence of true compliance adherence, better functioning mechanisms which rely on compliance, and a more robust marketplace for consumers and issuers alike. For those of you with the fortitude to continue the climb, be aware that the remnants of ACA obfuscation will grow too heavy to carry as the ascent turns steeper.

Engaging in honest ACA dialogue may be a taller mountain than you thought you had signed up for and you may not like that we had to leave behind some of your "park close to the building" friends with oversized ambitions at base camp. As we approach the summit, there may be some high-profile ACA mountaineers you expect to be there waiting for you; many of them got lost on the trail and ended up at some no name peak around 8,000 feet. They are stuck in the clouds and can't clearly see the ACA but they have assured themselves they have successfully reached their destination; their vision will not improve soon. It may take them a while to realize where they took a wrong turn, which, if experience serves us well, will be followed by years of denial. We have seen this play out time and time again on the ACA mountains. If you're still on the right path and can feel the air getting thinner and the crowd growing smaller, you might have the fortitude to function in the world of ACA clarity at 14,000 feet. Please know that we're cracking open a big can of transparent honesty at the Gannett Peak summit (close enough to 14k) and acceptance of the suppressed ACA truth is something you will need to learn to relate to.