HHS Will Pay Risk Corridors as Promised

BNA’s Health Care Daily Report™ sets the standard for reliable, high-intensity coverage of breaking health care news, covering all major legal, policy, industry, and consumer developments in a...

By Nathaniel Weixel

Nov. 19 — Seeking to soothe concerns among insurers, the HHS Nov. 19 reiterated that risk corridor payments will be made as promised.

The Department of Health and Human Services in a one-page memo reinforced its previously stated position that it plans to make up the shortfall for 2014 risk corridor payments from 2015 collections, and, if necessary, from 2016.

“Consistent with prior guidance, assuming full collections of risk corridors charges for the 2014 benefit year, insurers will be paid an amount that reflects a proration rate of 12.6% of their 2014 benefit year risk corridors payment requests,” the agency said in the memo. “HHS recognizes that the Affordable Care Act requires the Secretary to make full payments to issuers, and HHS is recording those amounts that remain unpaid following our 12.6% payment this winter as fiscal year 2015 obligation of the United States Government for which full payment is required.”

Insurers requested $2.87 billion for 2014 payments under the risk corridors program, but the agency Oct. 1 said they will receive only $362 million—the prorated 12.6 percent of their 2014 requests (191 HCDR, 10/2/15).

Low risk corridor payments for 2014 were a catalyst for most of the recent closures of the Consumer Operated and Oriented Plans (CO-OPs).

In the event of a shortfall for the 2016 program year, the HHS said it “will explore other sources of funding for risk corridors payments, subject to the availability of appropriations. This includes working with Congress on the necessary funding for outstanding risk corridors payments.”

Reaction to UnitedHealth

Martin Hickey, chief executive officer of New Mexico Health Connections and chairman of the National Alliance of State Health CO-OPs, told Bloomberg BNA in an e-mail that the message from the HHS “doesn't help” 2015 finances for the CO-OPs.

Hickey said the agency probably felt the need to respond to UnitedHealth Group's Nov. 19 announcement that its earnings will be reduced by $425 million for 2015 and that it is “has pulled back on its marketing efforts for individual exchange products in 2016” (see related article).

Stock prices for other publicly traded health insurers also declined with the UnitedHealth announcement.

“With the big guys responding to shareholders and dropping out, this only reinforces the needed support by CMS for the CO-OPS,” Hickey said.

Budget Neutrality

Section 1342 of the ACA creates a temporary risk corridors program to provide issuers of qualified health plans in the individual and small group markets additional protection against uncertainty in claims costs during the first three years of the marketplace, the CMS bulletin said. Under the program, if an issuer's costs are less than 97 percent of its target amount, it pays the HHS a percentage of the difference. If an issuer's costs are more than 103 percent of its target amount, the HHS pays the issuer a percentage of the difference.

The risk corridors program runs from 2014 through 2016. Appropriations legislation enacted in 2014 includes a provision intended to ensure the program is budget neutral, limiting the administration from providing funding for the program that goes beyond the amount collected from insurers.

Collection of risk corridor charges began this month; remittances to issuers start in December.

To contact the reporter on this story: Nathaniel Weixel in Washington at nweixel@bna.com

To contact the editor responsible for this story: Brent Bierman at bbierman@bna.com