Adams Actuarial LLC

06/16/2026

In the United States, the Actuarial Standards Board produces the Actuarial Standards of Practice (ASOP) which are intended to guide actuaries in methodologies to be used in performing their work. As a health actuary I have used these Standards many times. The Standards are intended to give the health actuary flexibility as there are many ways to get an answer to an actuarial problem. Also, nobody knows all of the answers and the makers of an ASOP may misfire on occasion.
One example of when I had to do things differently than an ASOP said was when I was asked by a company to determine how much the company should charge an employee who left the company with money in their Health Savings Account that was put there while they were employed. Now, legally, that money belongs to the employee when it is put in the Health Savings Account. The company gave me a copy of an ASOP that showed how to calculate how much to charge the employee to get access to their own money that happened to be in a Health Savings Account. I was a little angered by the unfair practice but just told the company that the amount to be charged in this situation was $0. I am sure that the company went to another actuary who may or may not have calculated an amount for the company to charge its former employee in order for the former employee to get access to their own money. I almost told the company to tell the former employee to call me if they needed actuarial help in any legal action that they chose to take in order to get their own money back but I decided it was better if I did not.
Another situation came up when I was calculating health care costs for a valuation of a liability that a company to put on its financial statement for covering some health care costs for its retirees. The company's retirees were covered under a plan that was community rated, meaning that the rates were calculated based on the claims experience of many different companies and not just the company for which the retiree liability was being determined. In this case it does not matter how old the retirees in the company were, the cost to the company for the retiree's health care costs were exactly equal to the community premium rate. When a company covers its retirees under a plan that is experience rated then the age of the company's retirees is important because the older a company's retirees are then the higher the health care costs are, on average. Therefore, claims costs for a community rated plan should be based on the community rate while claims costs for the experience rated plan should be an age graded table. The corresponding ASOP unfortunately called for the community rates to be age graded, but this does not make sense. This was some years ago so hopefully they have modified the ASOP by now.
The moral of this story is ASOPs are a very good thing to have but do not assume that everything is perfectly correct in them. The wording in them is such that if an ASOP says that an actuary must do something then it is a fundamental rule and the actuary must follow the ASOP. If the ASOP says that the actuary should do something then it is recommended but the actuary may do something else as long as it follows sound actuarial principals.

06/14/2026

This implies that premium rates will increase significantly in 2027.

06/13/2026

This may be the beginning of what is called a "death spiral". The people who have dropped this coverage have decided that they are not getting their money's worth out of the premium that they would have to pay for coverage, or they simply cannot afford to pay for coverage. The people who have decided that it is not worth it are the people with lower health care costs. When they drop out that leaves a sicker population and premium rates increase as a result. This means that more people will drop out next year for the same reasons. This cycle continues into the future.

For the first time since the ACA’s enhanced premium tax credits were introduced in 2021, insurer participation in the Marketplaces has gone down.

The average number of issuers offering plans in the ACA Marketplaces has declined from a record high of 9.6 issuers per state in 2025 to 9.0 issuers per state in 2026.

06/12/2026

On a different topic, the 2026 report on the solvency of the Social Security Trust Fund was released recently and shows that the Trust Fund will be depleted somewhere between 2032 and 2034, depending on whether you include the disability portion of the Fund or not. This has been shortened from the previous estimate due to actions of the current regime, namely immigration restrictions and reductions in taxes for Social Security benefits.
The aging population in the United States has been an increasing problem for the future solvency of the Social Security Trust Fund for several decades. Social Security was created in 1935 and the population demographic assumptions used to determine future funding was based on the demographics at that time. The birth rate has been steadily decreasing since that time and the life expectancy has significantly increased during that period also. As a result, there are a higher proportion of the population receiving Social Security benefits and a smaller proportion paying payroll taxes to fund Social Security for future recipients. The financial solvency of Social Security has been deteriorating for decades but Congress has failed to step in to make the necessary changes to help the system. The aging problem would have been a lot worse if it were not for immigration where the influx of younger immigrants has lessened the aging problem. The actions of the current regime to reduce immigration has increased the aging problem and caused additional funding issues for both Social Security and Medicare.
At a time additional contributions to the Social Security Trust Fund was needed to maintain its solvency, the current regime decided to actually decrease contributions to the Trust Fund and shortening the life of the Fund by giving a tax break to some beneficiaries.
In my opinion there will be no changes that will help stabilize Social Security solvency until at least 2029. At that point there will likely be benefit reductions or contribution increases. The benefit reduction that has been most discussed is increasing the Normal Retirement Age at which beneficiaries will start to get benefits. The approach which I support is the elimination of the income ceiling which determines the maximum income that can be taxed for purposes of funding Social Security. In 2026 any income over $184,500 will not have a Social Security tax attached to it. Elimination of this income ceiling would allow additional taxation on the wealthy and extend the lifetime of the Social Security Trust Fund for a substantial period of time...

06/11/2026

This is a second post on Payer payments to Providers. The first post centered on ways to change the payment structure to decrease incentive for Providers to increase the number of services that they provide in an attempt to increase revenue. This post will discuss the high amounts in each payment, mainly on commercial insurer business.
If you take into account that the Per Capita GDP in the United States is roughly 40% higher than the GDP in other developed countries then it makes sense that Medicare fee schedules and payments are about 50% higher than the corresponding fees in other countries. What does not make sense is that commercial insurer physician payments are 50% higher than Medicare and, thus, 100% higher than the corresponding fees from other developed countries. Similarly, hospital fees for commercial insurers are 150% higher than the corresponding fees for other developed countries.
The reason that commercial insurer physician fees are 50% higher than Medicare is that Medicare has more leverage in negotiations. The government practically tells providers what Medicare will pay them. Hospitals have much leverage in negotiations , especially due to hospital mergers. Whenever the government cuts costs, it means Medicare and Medicaid fees are adjusted down and the providers negotiate as much as they can into its fees with commercial insurers. This means that the cost "cuts" are really just cost shifting from Medicare and Medicaid to commercial insurance.
The way to avoid this is to set commercial insurance fees as a precise percent of Medicare, such as 50%. The problem is to determine a percent relationship that will be sustainable. A 150% increase in commercial hospital fees over Medicare is probably not advisable but a reduction in this percent may lead to a very substantial decrease in hospital revenue. A detailed analysis needs to be performed to determine a reasonable relationship to use between Medicaid, Medicare and commercial insurance and then determine the total revenues needed for each segment of providers. The end result may well be that commercial insurers pay higher fees than government programs but once that relationship is set then it will make setting future fees easier. Having an independent board setting the fees will make it so that the fees are set appropriately each year.
the fact that hospitals in the United States get paid at a level 150% higher than its counterparts in other developed countries may possibly mean that there will be a reduction in hospital fees and revenue after this study but we need to go through the process to see. it is also possible that this study will reveal a legitimate reason why hospital commercial insurer fees are so high.
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06/10/2026

The system of paying providers in our health care system adds to the problem of high health care costs. Remembering that our health care system is made up of businesses trying to make a profit or at least break even, providers are no different. The system of Payers paying Providers for each service provided encourages providers to perform more services, possibly increasing the number of unnecessary services performed which decreases quality of care, quality of life, health status and increasing costs. Although there has been many modifications proposed and implemented, there has been no Silver Bullet found as each modification has strengths and weaknesses. Among the implemented solutions are value based payments, capitation, bundled payments, gain/loss sharing systems, preauthorization and data analysis.
Value based payments are based on the estimated effectiveness of the care given. This can help increase the effectiveness of the services provided by adding a financial incentive to coordinate with other providers and, researching the best treatments for the specific issues of the patient including the latest treatments in order to determine the most effective treatment. Unfortunately, the additional payments for these systems generally ranges from 11% to 15% which may not be enough to encourage many providers, especially given the significant additional administrative cost necessary to get these additional funds. Also, evaluating the effectiveness of health care services provided can be problematic.
Capitation is a method of paying providers a fixed amount per month for a specific basket of services for each patient. Full capitation is where the capitation is designed to cover all services for the patients. Lesser capitation models may only cover a few services, such as those generally performed by primary care physicians. Full capitation has the potential to promote the most effective care by providers as a whole. It has the potential to drive the provider group into financial distress or even insolvency if they are unable to keep costs below the amount of the capitation received. Due to the financial incentives involved, there may be situations involved where appropriate services may not be performed in an effort to save money although this would not be nearly as common as with the effects of preauthorization as described later.
Bundled Services payments are set payments for an episode of care, such as with joint replacement surgery, heart attacks and chronic health issues. Advantages and disadvantages are similar to those of capitation although on a smaller scale.
Gain and loss sharing programs give the providers some financial risk for variations in claims costs versus the calculated claims targets. If claims are higher than target than the providers may have to pay a portion of the loss. Similarly, if the claims end up below the target then the providers may get a portion of the gain. Advantages and disadvantages are similar to those of the value based payment system.
Preauthorization requires the provider to get permission from the Payer before certain treatments, deemed high risk by the Payer, can be performed. The intent is to reduce some of the 25% to 35% of health care costs that are considered to be Fraud, Waste and Abuse. Reducing unnecessary claims leads to increases in quality of care, quality of life and health status while decreasing health care costs. Unfortunately, preauthorization can lead to appropriate services being turned down by the insurer which can be problematic for the patient.
Data analysis on provider treatment patterns and effectiveness are increasing in number and precision. The idea is to analyze claims to find outliers in physician treatment habits and treatment effectiveness. This data is used to modify behavior to increase treatment effectiveness overall. This method shows promise but much more analysis needs to be done and a national database of results and recommendations needs to be established which can be used in all locations, to some extent.
There is room for all of the above in our future health care but I feel the tools that have the most potential are value based payments, preauthorization and data analysis. All three need to have major advances in methodology in order to be more effective. The measurement of what 'value' means needs improvement in order to properly monetize the positive affects on our health care system. Additional analysis needs to be done to ensure optimal effectiveness and minimal declination of appropriate treatments by preauthorization systems. Likewise, additional study needs to be done for the data analysis tool. For all three tools there needs to be a national database of results and recommendations. This will allow for use nationally and encourage further analysis.
This article does not touch on the high cost per service which was discussed in a previous article on prescription drug prices. The next article will discuss the overall high level of provider prices .

06/08/2026

One of the complaints about our health care system is that it is designed to help treat the sick and injured and not designed to prevent disease and injury. Doing a better job of preventive care would increase, quality of care, quality of life and productivity while actually decreasing costs.
Providing free immunizations would help substantially reduce the frequency of serious effects of preventable diseases such as measles, polio, diphtheria, whooping cough, and other diseases. Universal health care would increase the number of people who have health care coverage and, thus, the number of people who have access to immunizations. Physicians need to have incentives to encourage all patients to get immunizations. The primary care physician is in the best position to educate the patient on the value of immunizations, assuming the patient is seeing the primary care physician on a regular basis, again only possible en masse with universal health care.
Access to testing and screening for such things as cancer, diabetes, and heart disease will also help reduce large claims by detecting these diseases at an early stage when treatment is more effective and the health risks are less.
Type 2 Diabetes can also be detected through preventive screenings. Type 2 diabetes can often be treated with changes to diet and exercise before the disease causes more severe issues. Medicines can be prescribed if diet and exercise are not enough. Improper diagnosis of diabetes can lead to heart disease, kidney damage, nerve damage and vision loss although these issues are preventable with proper treatment.
Obesity related costs are estimated to be about 9% of total health care costs in the United States with approximately 40% of Americans being classified as obese. This is compared to Western Europe which has approximately 16% of its combined population being classified as obese. Unhealthy eating habits can lead to weight gain. This can be caused by eating an excess amount of fast foods either by simple choice or by necessity, such as for those who live in "food deserts" where the only available food is fast food. These often exists in poorer urban areas. Government subsidies can be used in these areas to help establishment of food markets with healthy foods. Subsidies for fruits and vegetables can be used on fruits and vegetables to make these items more affordable in areas where markets already exist but prices on fresh produce are still too high. Taxes on sugary drinks are a good idea as these add substantial cost to our health care system. This tax may dissuade some people from ingesting such high quantities of these unhealthy drinks or at the very least make those who drink these beverages pay for a portion of the additional cost that these beverages are adding to our health care system. Prohibiting advertisements on unhealthy food such as ultra-processed foods and sugary drinks may help cut back on the consumption of these unhealthy items.
another method of reducing the obesity problem is to set up an environment where physicians are comfortable discussing this issue with patients. The current payment structure often requires Payers (Medicaid, Medicare, commercial insurers, etc.) to pay the physician for each service performs. This may give the physician incentive to just treat the symptoms of the obesity and not risk losing the patient to the physician down the road because the physician brought up the topic of obesity to the patient and the patient decided to switch doctors as a result. This happens more often than you would expect as 40% of the population is classified as obese so the patient may think that there is nothing wrong and that the physician is just being rude. Anyway, simple things that can be done to help lower obesity rates is for Payers to cover dieticians and fitness centers and for physicians to recommend these services to patients. Municipalities can also encourage exercise by making it more convenient to walk, bike, jog, skateboard, etc..
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06/05/2026

In the United States, a little more than a third of physicians are primary care physicians with the other two-thirds being specialist physicians. In other developed countries between half and two thirds of physicians are primary care physicians. The shortage of primary care physicians (P*Ps) in the US causes a few problems. If a patient with minor health issues cannot get an appointment with a P*P for a couple weeks then they may end up in the emergency room and the cost may be 10 or more times what it would be at the P*P office. Also, P*Ps coordinate care for a patient, thus reducing the number of duplicative and other unnecessary services. P*Ps also provide valuable preventive care which reduces overall health care costs and increases quality of care and quality of life.
The overabundance of specialist physicians in certain specialties also causes an increase in the number of unnecessary services performed. Remembering that physician offices are businesses, there may be a tendency to increase the number of services in these specialties to improve financial stability. Specialists earn in excess of $400,000 per year while P*Ps generally make less than $300,000 per year.
The additional income that a specialist physician earns means that there is substantial incentive for aspiring physicians to study to become specialists and not P*Ps. Part of the reason is that tuition is so high and the aspiring physicians need to take out a substantial amount of loans to get through college. Becoming a specialist allows them to pay off these loans much quicker than if they became a P*P. There have been significant efforts to provide grants to students who study to become P*Ps to help pay for their tuition but there needs to be much more attention paid to this problem.
Additionally, even aside from the tuition, the substantially larger income for specialists draws more aspiring physicians into becoming specialists. Provider fees need to be increased for P*Ps and fees need to be reduced for those specialists who work in a specialist category where there is an overabundance of specialists. Studies need to be done periodically to determine which categories need more physicians and which categories have too many physicians.
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06/03/2026

I have gone back and forth regarding whether advertising should be allowed for health care entities. As always, I will start with pharmaceutical manufacturers. One good point brought up by supporters of this advertising is that it educates the patients as to what drugs are available and what they do, in theory. Unfortunately, these ads do more harm than good. Often these drug ads do not even tell you what the drug does. I have seen studies that show that 50% of all drugs prescribed are not necessary and these ads are a major reason why. Patients see these ads and decide that they cannot live without these drugs. The patient then goes into the doctor and demands the drug. In the doctor's mind, the doctor has a choice. The doctor thinks that he or she has to prescribe the drug or lose the patient to the doctor down the street who will prescribe the drug. The result is that these ads, which are supposed to educate, are actually causing an uneducated patient to get a drug that they may not need. The resulting side effects of this drug that the patient may not need may decrease health status, quality of care, and quality of life while increasing costs due to the cost of the drug and treatment of the side effects. The best place for the patient to be educated about possible drug treatments is through their doctor, not a misleading advertisement.
i also see no need for advertising for other providers. There are enough quality rankings of hospitals, doctors and other providers and other information available from the governments, the Internet, and employers that advertising would just be an additional cost to an already overburdened health care system.
Likewise, there is enough information available about health care payers that advertising is not necessary. Information is available from doctor's offices, the Internet, employers, health advocates, brokers, and government sources. Especially bothersome to me is the naming of sports stadiums after insurance companies. This is a wasteful additional cost added to our already overburdened health care system.
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06/02/2026

Prescription drugs is a common topic in my posts on how to fix our broken health care system. The main reason for this is that the issues brought up about prescription drugs are often a microcosm of issues that are occurring in other sectors of our health care system. So the following article discusses controlling payments per prescription but similar issues exist in other areas, such as anesthesiology and emergency room. There are many nuances to the prescription drug issue that are not present in other areas and some of these will be discussed in this article.
currently drug prices in the United States are double the prices for these same drugs in other countries. The reason is that the US is the only country that has no control over drug prices. The problem mainly exists for drugs that are under patent and have no competition, called single source brand drugs. Since the drug has no competition then there is no limit on what the pharmaceutical manufacturer can charge. Once drugs come off patent then they will likely have competition and that will bring the price down significantly. Something needs to be done to control single source brand prices and also to control prices for other drugs that have extremely high prices for other reasons. Note that this article targets the prices set by the pharmaceutical manufacturer, where I believe that most of the problem exists, and does not discuss the impact of the middlemen even though there are areas for improvement there.
one thing to remember is that substantially reducing prescription drug prices will not reduce funds necessary for drug research. Instead, it will substantially reduce what I call pharmacy manufacturer marketing costs. These include television ads, advertisements in periodicals, payments to politicians designed to tip laws in favor of pharmaceutical manufacturers, payments to medical universities designed to influence prescribing habits of future doctors, and other payments designed to influence the system.
currently, for the most part, Payers, such as insurance companies, agree to buy drugs from pharmaceutical manufacturers at a percent discount off charges. There is often no restriction on the amount that the pharmaceutical manufacturer can charge. This leads to the astronomical drug prices that we have today.
Any attempt to lower drug prices needs to include private insurance and not just government programs. Historically cost reduction legislation has only included reductions in payments for government programs. As a result, the cost reductions for government programs were then passed on as cost increases to commercial insurers. Commercial insurers do not have a whole lot of leverage in negotiations with providers, which is why providers are so afraid of a single payer health care system.
Pharmaceutical manufacturers obviously can make a profit at much lower prices than what they charge in the US as they would not sell their drugs overseas at such low prices if they could not.
The use of an index of prices used by other countries is a good method of setting drug prices. A board can alsn be set up that would help in the process of setting prescription drug prices for all Payers, government and commercial.
Again there are many ways to accomplish the task but somehow there needs to be controls on how much pharmaceutical manufacturers can charge for its drugs.