Actuarial Challenge Final Results

Round Two of the Actuarial Challenge is complete! All submitted papers are described and available below. This link ( provides a comparison of modeling results for the five papers chosen for Round Two, conducted on a consistent basis through use of the Milliman Health Care Reform Financing Model (HCRFM). To evaluate each proposal, it is important to consider the impact on enrollment, premiums, and out-of-pocket costs, as well as how other important stakeholders in our healthcare system would be affected, including insurers, providers, and taxpayers.

A high level of interest in the Actuarial Challenge papers is anticipated from media, health care system stakeholders, and hopefully our lawmakers as they consider changes to our health care system. The papers offer a variety of ideas that aim to make coverage in the individual market more affordable and stable.

We wish there had been time to model all 14 of the papers submitted, but we expect that even the dissemination of the ideas in each of the papers will be fruitful for the health care reform discussions taking place.

The submissions below are solely the views of their authors. They are provided for the general information of all those interested in the submissions received, and they do not represent an official position of the American Academy of Actuaries, Milliman, or the Robert Wood Johnson Foundation or necessarily reflect the opinions of the Academy’s individual officers, members, or staff.

Modeled Proposals

Other Proposals

Modeled Proposals
This section provides a brief description of each of the five modeled proposals. A PDF of the detailed proposal is available by clicking on the proposal name. Also shown are the names of the team leader(s) of each paper. Contact information for each leader can be found in the Actuarial Directory by entering their last names.
Why Not BE HIP?
Team LeadRebecca Kander 

Establishes a nationwide Basic Essential Health Insurance Plan (BE HIP) covering a core set of services / benefits set by federal regulation. Allows purchase of state regulated standardized supplemental plans (benefit riders) to offset cost sharing (i.e., upgrade to richer benefits). Automatic enrollment and / or penalty of full cost of basic plan if not enrolled. Uses a risk adjustment program and reinsurance to protect insurers. Premium equalization process to account for socioeconomic variations between insurers in a given market. Premium subsidies use similar methodology as the Patient Protection and Affordable Care Act (ACA), although percentages may differ.
Carrot Flowers
Team LeadBrian Tajlili 

Creates three pools in the individual market: (1) Over 250% FPL (federal poverty level) with state regulated underwritten market, (2) Under 250% FPL with federally funded underwritten and subsidized market, and (3) Special Needs (High Risk) Pool with a federally-funded, highly-subsidized market for individuals with persistent high costs or uninsurable conditions. Guarantee issue, but requires continuous enrollment. Incentivizes providers to manage care. Encourages tax parity between individual and group market by capping group tax deductions. Allows more tax-favored health savings account contributions.
Improving the Individual Market
Team Lead: Jim Kohan 

Revises rating to allow a wider premium range by age (5-to-1) and limited consideration of an enrollee’s health status in setting premium rates via an automated process (up to an additional 50% of premium). Uses contributions to individual health savings accounts for mid / low income consumers to replace premium and cost sharing subsidies. Revises risk adjustment methodology and restores a reinsurance mitigation program. Uses Medicaid reimbursement levels and increases health cost transparency. Increases penalties for not obtaining health insurance, but allows more benefit plan design flexibility. Reduces mandated benefits based on scientific evidence and use of an independent board. Incentivizes payment reform, integration of health care information, implementation of clinical best practices, and value-based care.
Team Leads: Emily Bartel and Rod Turner

Uses auto enrollment into newly defined catastrophic plans to enforce participation, and combines the individual and small group markets (with no self-funding allowed in the small group market). Consumer can add benefits through purchase of supplemental benefit riders. Block funds for subsidies provided from federal to state for the state to administer. Elimination of dual regulation to reduce expenses. Allows wider rating for age (5-to-1) and lowers or eliminates minimum medical loss ratios. Continues risk adjustment and restores reinsurance for up to five years. The equivalent of cost-sharing reduction (CSR) funds would be deposited into a consumer’s health savings account (HSA), if eligible. Use reference-based benefit pricing for provider fees. Encourages risk contracting with both upside and downside risk to the provider. Eliminates direct-to-consumer advertising.  Eliminates grandfathered and transitional business. Focuses on consumer accountability by providing consumers with improved cost transparency and other resources to help them make educated decisions regarding their health care.
The Simplifiers
Team LeadsSharon Leach and Liz Leif

All residents receive a fully publicly-funded preventive plan and must purchase an insurance plan for non-preventive services. Insurers must offer a standard plan but may offer additional plans subject to state regulations such as actuarial soundness, minimum coverage levels and loss ratios. Premiums will be limited to significantly lower and more affordable levels. A simplified, permanent publicly‑funded risk mitigation program based on reinsurance formulas will result in reduced premium. Hospital costs will be reduced by payment at Medicare reimbursement levels. Drug costs will be lowered by allowing purchase from qualified international locations. Simplified low-income premium discounts will be available. Penalties equal to the lowest cost insurance plan will apply for non‑coverage. Lifetime universal Medical ID cards will be used to monitor enrollment, provide electronic medical records, and act as low-interest credit cards to pay for premiums and out-of-pocket medical expenses. Exchanges will act simply as informational websites.
Other Proposals
Nine other teams also submitted papers for the Actuarial Challenge. While unfortunately we could not model all of the entries, these papers also offer health care reform ideas that add to the discussion of ideas on how the Individual Market can be improved and stabilized. A PDF of each paper is available by clicking on the proposal name. Following is a high-level summary of each of these other papers (in random order):
The Mod Squad
Team LeadJeffery Rykhus

Increases incentives to first-time enrollees, but with significant penalties for not obtaining coverage after first year (150% of lowest cost Silver plan). Extreme marketing blitz required for first year program. Institutes concurrent payment of penalties during coverage year using cell phone bill for both premium and penalty billing. Includes all individuals not eligible for Medicaid in the Individual market and prohibits withdrawal of Medicaid expansion. Creates wellness / healthy living premium subsidy and optional pharmacy coverage within ACA plans. Modifies rating to allow wider premium range for age (5.5-to-1.0). Eliminates grandfathered and transitional plans. Modifies medical loss ratio and COBRA requirements. Increases availability of premium subsidies to 600% of FPL for those in more expensive markets and areas. Restores reinsurance and risk corridor mitigation programs and requires proposed risk adjustment changes. Creates trust fund for risk corridor payments to insurers and for other federal ACA expenditures. Addresses primary care doctor shortage. Individual premiums become tax deductible to be consistent with tax deductibility of group insurance premiums.
JHU Actuarial Club
Team LeadScott DeLawder

Provides enhanced benefits (e.g., gym membership, fitness classes, preventive services, etc.) in insurance coverage to encourage younger individuals to purchase. Allows health insurance plans to segment coverage of specific services to lower cost. Transforms premiums from yearly cost to longer term policies with investment opportunities and increases annual penalties for not obtaining insurance. Closes coverage gaps by expanding Medicaid, covering non-citizen immigrants, and requires more employers to cover employees. Requires health service pricing transparency.
Healthy Behavior Incentive (“HBI”) Plans
Team LeadEric Unger

Healthy Behavior Incentive Plans encourage a partnership between the insured, insurer, and health care provider to maintain well-being rather than just reimbursement for expenditures. They allow use of age-specific premium discounts upon a member’s policy renewal, based on health / lifestyle choices and improvement in health status over time.

Incentive plans focus on rewarding choice-based improvements to health status, not just winners of the genetic lottery. Improvements are validated not by insurers but by trusted providers, who partner with members on their individual journeys to better health and a long-term reduction in the cost of care. 
Both the proposed discounts and the proposed incentive behaviors may be a part of the state DOI’s existing annual premium review, where they may be modified or rejected. But the market ultimately determines which behaviors are most effective at reducing claims costs, since insurers need not offer them and members need not buy them. 
Underwriting and Premium Rating using Risk Adjustment
Team LeadKaran Rustagi

Focuses on improving market stability through increased enrollment of lower cost individuals by revising the rating basis to better align with expected costs. Uses uniform prospective risk scoring to place all insureds into health status rating bands. Consumers pay up to a sliding scale percent of income with subsidies filling in the difference. Additional subsidies for cost sharing applied to low income insureds. Guarantee issue with state-based assessments across insurers to help fund subsidies for highest rating bands. No individual mandate, but a reentry penalty for those who drop coverage and reapply. Every insurer must offer a state-designed benchmark plan, but no restrictions on benefit designs for other plans. Requires a funded HSA for a consumer to choose a high out‑of‑pocket plan. There would be no federal exchanges and no reinsurance or risk corridor programs, but would use a prospective risk adjustment program. Insurers work directly with states.
Team DC
Team LeadDave Carlson

Increases individual market penalties to encourage more enrollment by young and healthy uninsured, and mitigate developing anti-selection spiral in the individual market. Refine / extend federal government-funded backstop to insulate insurers from developing market, analogous to backstops for catastrophic losses in flood, earthquake, and severe windstorm markets. Argues that broader health care / health insurance economics and function will be improved, with benefits for the employer‑provided and individual markets, by keeping / implementing / extending the Cadillac plan provisions / penalties in the group market.
Team ACA Version 2.0
Team LeadMischelle Schweickert

Proposes changes to the subsidy and risk adjustment programs. In order to address the cliff created at the 400% FPL subsidy level, proposes extending the poverty threshold and providing a more tapered reduction of subsidies. In addition, considers the possibility of incorporating local income levels to account for varying cost of living across the nation. For the risk adjustment program, proposes modifying the metallic-specific risk factors to more closely align to actual experience, thus reducing the extreme variation in risk adjustment (RA) transfer at the different metal levels. Finally, proposes using market-level paid claims per member per month (PMPM) instead of premium PMPM to better balance recoveries.
A Social Insurance Solution To Health Care Finance
Team LeadEric Klieber

Proposes to use a social insurance model to replace all current health insurance (across all markets). Covers all legal residents in the program through a payroll tax for funding. Insurance plan would cover preventive care and catastrophic care (exceeding 7.5% of income). Low income families would receive additional assistance similar to Supplemental Nutrition Assistance Program (SNAP) benefits. Routine care would be funded by individuals, but administered through a central fund, billing patients as with a credit card. Administrators must negotiate with providers, but must make all fees available to the public.
Consulting Actuaries for Sustainable Healthcare
Team LeadJoan Ogden

Insurance Reforms to improve actuarial soundness

  • Medicaid in all states <138% FPL
  • Basic Benefit Plan, using Medicaid reimbursement: 138% - 200% of FPL
  • Auto-enroll uninsured into Basic Benefit Plan when care needed; additional deductible of up to 12 months premiums
  • 50% minimum actuarial value
  • Eliminate metal levels
  • Subsidies if premiums for 50% actuarial value (AV) plan >10% MAGI (modified adjusted gross income)
  • Guaranteed issue for up to 10% plan value increase, at renewal
  • Actuarially sound rating for age, gender, and health status (within ±20%)
  • Adult children rated same as non-dependent adults
  • National reinsurance for 90% of claims exceeding $250,000

Provider Price & Quality Reforms, to address unsustainable underlying health care spending

  • All private fee-for-service (FFS) patients charged same
  • Fees publicly available
  • Billed charges = negotiated fees
  • Pro-active fraud avoidance
  • Direct-to-consumer (DTC) advertising restrictions
  • Remove barriers for non-physician health care professionals
  • Rigorous certificates of need
  • Computer assisted diagnoses
  • Expanded standards of practice
  • Expanded medical homes
  • Standardized electronic health records (EHRs), patient owned

True Health
Team LeadKen Beckman 

Develops actuarial incentive compensation for physicians who are effective at addressing the underlying cause of patient health conditions by using the “food as medicine” concept, which has been proven to not only prevent, but reverse the chronic costly conditions faced by Americans today (including heart disease, diabetes, high blood pressure, and obesity) without any negative side effects at minimal cost. Currently, the vast majority of the population and even many in the medical and insurance fields are unfamiliar with this concept. This solution seeks to increase awareness of this approach on a much wider scale and change provider reimbursement to make treatment using this concept an option for everyone. A successful implementation of this proposal would result in lower premiums and increased access to the individual health insurance market. It would also serve as a model for the group, self-insured, Medicare, and Medicaid markets.