State insurance regulators are coming up with guidelines that could affect how health insurers pay for new Patient Protection and Affordable Care Act (PPACA) programs.
The Emerging Accounting Issues Working Group and the Statutory Accounting Principles Working Group are holding a joint teleconference meeting later today to work on accounting rules for the PPACA "3 R's" risk-management programs -- a temporary reinsurance program, a temporary risk corridor program, and risk-adjustment program that's supposed to be permanent.
The NAIC's Executive Committee and its Plenary are holding a teleconference meeting next week to consider adopting rules for payment of the PPACA Section 9010 assessment, or "health insurance tax."
PPACA Section 9010 requires insurers to generate $8 billion in revenue for the government this year and more in later years by paying a size-based fee.
The 3 R's rules
Regulators on the NAIC working groups say they based the current draft of "INT 13-04: Accounting for the Risk Sharing Provisions of the Affordable Care Act" on NAIC guidelines for Medicare Part D risk-management programs.
The PPACA risk-management program getting the most attention -- the risk corridor program -- is supposed to use money from any individual or small-group carrier, inside or outside the PPACA exchange system, that has a good underwriting profit margin in 2014, 2015 or 2016 to help PPACA exchange plans with poor underwriting results.
If too few carriers do well to help exchange carriers get underwriting profits up to the PPACA minimum, the federal government is supposed to make up for the funding shortfall.
One open question is how state regulators will handle treatment of payments coming from the temporary risk corridor program.
Originally, drafters suggested that insurers should wait 90 days before treating amounts from any of the risk-management programs as admitted assets.
America's Health Insurance Plans and the Blue Cross and Blue Shield Association are asking regulators to let insurers count payments due from the risk corridor program as admitted assets, "inasmuch as they are a receivable from a government or a government-sponsored entity, the funding of which is mandated by law."
Section 9010 assessments
The guidelines the Executive Committee and the Plenary are reviewing -- the proposed Statement of Statutory Accounting Principles (SSAP) Number 35R -- deal with the mechanics of coming up with words to describe the fee and determining how insurers include the fee in financial statements.
The SSAP Number 35R drafters used the term "data year" to refer to the calendar year immediately before the "fee year" -- the year when the Section 9010 fee is actually due at the U.S. Treasury.
During a data year, an insurer or other reporting entity would have to create a "special surplus amount" equal to the fee amount it expects to pay in the fee year.
The insurer could wait until the fee year comes along to officially recognize the fee liability, but it would have to show how paying the fee during the data year would have affected its risk-based capital (RBC) ratio.
The guidance would be effective for annual reporting periods starting Jan. 1, 2014.