Implementing New Provisions for the 3Rs

Provisional support for health insurance issuers

As the country struggles with the implementation of several of the provisions of the Affordable Care Act (ACA), health insurance issuers face implementation of their own set of new provisions established by the Act. Specifically, there are three programs which are commonly referred to as the 3Rs - Reinsurance, Risk Adjustment and Risk Corridors which take effect in 2014. Two of these programs, the Reinsurance and Risk Corridor programs are only temporary while the Risk Adjustment program is permanent. The basic purpose for these programs is to spread adverse claims experience from the individual markets amongst the health insurers across the country.

The Statutory Accounting Principles Working Group (SAPWG) has been working on identifying accounting guidance for these programs under current statutory accounting principles, as well as identifying the need to modify existing principles. Under GAAP, current authoritative guidance already exists for the provisions under these programs and therefore, the FASB has currently not provided any unique guidance to account for these programs. Existing applicable US GAAP has been identified as follows:

There continues to be deliberations at the SAPWG regarding these three programs and uncertainty continues with the health insurance issuers who face the requirements under these programs to either make additional payments or receive assistance for adverse claim payments. Major provisions of each of these programs are covered in our full article, as well as the current proposed accounting guidance under statutory accounting principles.

 
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