ObamaCare Clusterfuck: The calculators are broken because actuarial value is a crapshoot
I really, really hate to quote the Washington Examiner, but unless the guy's actually into fabrication (like Breitbart, but I'm guessing), there are problems. (Oddly, or not, nobody on the "progressive" sites seems to be applying their undoubtedly superior critical thinking skills to ObamaCare's rollout at all.) Richard Pollock, Washington Examiner:
States and insurance companies are supposed to use an "Actuarial Value" calculator. The actuarial value measures benchmarks for the four state standardized plans.
An AV value of 60 means the state plan covers 60% of the costs and enrollees pay 40%. The four plans range from 60% to 90% coverage.
Employers are to use a "Minimum Value" calculator, which assesses whether an employee health plan meets minimal federal criteria.
CMS released "beta" versions of the calculators in November 2012 and a "final" calculator this February.
The most glaring problem, according to users, is that the calculators do not reflect real world conditions.
Paul Hencoski [is] a lead partner at KPMG, the audit and accounting firm [which] represents 19 states trying to set up health care exchanges.
"There's been some question around the results they've been getting. And whether they represent the true actuarial value of what was being offered, Hencoski told The Washington Examiner.
Julie Peper, a senior consulting actuary at Wakely Associates in Denver, CO whose firm is advising Oregon, Vermont and Massachusetts agrees. "There are some things that are different in the AV calculator than what will be in practice," she said.
Mark Jamilkowski, director of KPMG's actuarial services practice told The Washington Examiner the situation is so acute "There are some states we know of that are interested in launching their own calculator."* KPMG would not identify the states.
Insurance brokers who assist employers say the MV calculator contains flaws too. Susan Rider, an account executive with the Indianapolis brokerage firm of Gregory & Appel told The Washington Examiner, "they don't ask the right questions. There are a lot of things missing from it that I as a broker look for in a plan."
Rich Stover, a partner with New Jersey-based Bucks Consulting, an actuarial firm, says the MV calculator is so rigid it cannot accept special features in large employer plans.
CMS declined to be interviewed for the story. Never a good sign.
We've discussed problems with actuarial value before: Kaiser did a study and found "substantial variation" in how three firms in the business of benefit determination calculated (if that's the word I want) the actuarial value of the same plan, "in spite of agreement upfront among the firms on a common set of major assumptions." In other words, actuarial value is a crapshoot. Highly paid professionals are throwing darts at a board.
So it's no wonder the calculators don't work; the problem with a lemon market is that it can't compare lemons to lemons. Now all this is being played out in software (and highly public software at that).
And it all comes down, again, to bad requirements coughing up a system architecture hairball: If health care were a right, and single payer delivered that right, the problem of determining the actuarial value of different insurance plans goes away entireliy, because it doesn't need to be done in the first place. "The cheapest, fastest, and most reliable components are those that aren't there" (Jon Bentelely).
NOTE * I read this as KPMG simultaneously shouting out to the Feds to fix this (which I don't think can be done) and to the States for more contracts. That's the consulting world! So of course they would use something like The Examiner to push the story, since... C'mon, you think Think Progress would?
UPDATE Adding, I suppose you could turn this around and say "The calculator is the way you determine actuarial value." It's the standard, so it's right by definition. So all the pissing and moaning from the insurance companies boils down to they aren't getting the results they've been used to getting in the past, which is what they mean by "the real world." OK, but ObamaCare accepts the health insurance paradigm, for good or ill. So if the actuaries are saying, "This is fucked up and bullshit," it might make sense to listen to them, even if actuarial value is itself fucked up and bulshit. It's always possible to make a bad situation worse, after all, which Obama has already accomplished in several other areas of endeavor.
UPDATE The Hill gives a Republican view:
On Tuesday, Republicans on the Senate Finance Committee wrote to Sebelius charging that the fundraising campaign “appears at best to be an inherent conflict of interest and at worst a potentially illegal augmentation of appropriation.”
Well, "augmentation of appropriation" sounds interesting. Looks like a staffer's been doing some research....