Rate shock confusion

The new Bloomberg View column by Adrianna McIntyre and me should clear up some pervasive confusion about the source of rate shock. Yes, research really does indicate that many people are wrong. Go read it.

I’d be remiss in not at least pointing out the existence of an AHIP-sponsored report by Milliman actuary James O’Connor. There was not space in the column to discuss it.

O’Connor’s results appear to contradict those on which we rely in our column. However, the Milliman report does not include details on methodology or underlying assumptions, which are available for the work in the RWJF/Urban Institute document we cite. Maybe O’Connor’s approach is reasonable. Maybe it answers a slightly different question than the RWJF/Urban analysis. (Some aspects of the work suggest this to be the case.) Without more detail, it’s impossible to tell. For this reason, we’re more comfortable with work we can fully evaluate. (Science!)

Having said that, I am sure some will prefer the Milliman study, even without access to methodological details. If that’s true of you, it’s important that you ask yourself why. It can’t be the (unknown) methods! (Science?)

@afrakt

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