Articles | SOA

Articles

Effects of State Cost-Sharing Reduction Pricing Guidelines on ACA Plan Premiums

Cost sharing reduction (CSR) payments are offered to low-income individual insurance buyers under the Patient Protection and Affordable Care Act (ACA). Such payments are provided through silver plan variants (73%, 87% and 94% actuarial values) with reduced cost-sharing requirements relative to the standard silver plans (70% actuarial value). These variants are part of the standard plan and are customer-facing. Prior to October 2017, the difference in costs to insurers between the standard silver plan (70%) and the silver plan variants (73%, 87% or 94%) were reimbursed by the federal government. After the reimbursements were defunded, insurers had to increase premiums to offset the CSR costs not being reimbursed in the silver plan variants. These adjustments are often referred to as “CSR loading.”

A Closer Look at the Reinsurance Loss-Recovery Component (RLRC) under IFRS 17

Paragraph 284 of the IFRS 17 Basis for Conclusions states that the contractual service margin (CSM) represents the unearned profit arising from a group of insurance contracts. IFRS 17 does not permit this margin to become negative (except for reinsurance contracts held). If an insurer expects a group of insurance contracts to result in a loss (referred to as an “onerous” group) to the insurer, that loss is recognized immediately in the profit or loss statement.