HHS Reinsurance Payments to Be $7.7B for 2015 Benefit Year

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By Sara Hansard

Feb. 12 — Payments under an Affordable Care Act program designed to protect health insurers from very high claims will amount to $7.7 billion for the 2015 benefit year, and the HHS will begin sending early payments in March, the department announced Feb. 12.

The payments, to help stabilize premiums in the individual market inside and outside of the ACA marketplaces, include $1.7 billion in reinsurance contributions carried over from the 2014 benefit year, the Department of Health and Human Services said.

“It's a positive sign” that the HHS will likely make payments as promised under the program, Deep Banerjee, director of Standard & Poor's Insurance Ratings, told Bloomberg BNA Feb. 12.

The early payments that are to start in March will be made at a rate of 25 percent, the HHS said in the notice. In October 2015 the HHS announced that it would make the early payments. The final 2015 coinsurance rate and estimated payment amounts will be announced in the final 2015 payment reports issued June 30, the HHS said.

Higher Than Payment Required by ACA

The $7.7 billion payment is higher than the $6 billion in reinsurance payments required by the ACA for 2015, Banerjee said.

“This is an attempt to calm down insurers that are nervous following the risk corridor shortfall,” Washington and Lee University law professor Timothy Jost told Bloomberg BNA in an e-mail Feb. 12. In 2015, risk corridor payments for the 2014 benefit year were paid at less than 13 percent of claims under the risk corridor program because of insufficient collections. The low payments spurred a number of struggling nonprofit CO-OPs created under the law to cease operations.

For the 2014 benefit year the HHS paid for insurers' claims of between $45,000 and $250,000 at a coinsurance rate of 100 percent. Aaron Albright, spokesman for the Centers for Medicare & Medicaid Services, said that “claims came in lower than expected compared to collections” for that year.

Making Up for Risk Corridor Shortfall

The higher coinsurance payments for 2014 also helped make up for that shortfall in risk corridor payments. Coinsurance payments for the 2015 benefit year are to drop to 50 percent for claims between $70,000 and $250,000, Banerjee said.

Both the reinsurance and risk corridors programs are temporary ACA programs in effect from 2014 to 2016 to help insurers cover high-cost claims. The ACA also includes a permanent risk adjustment program to protect insurers that cover less-healthy-than-average enrollees since the ACA requires insurers to cover everyone without charging more to people with health problems.

“Based on submissions from contributing entities for the 2015 benefit year as of Feb. 3, 2016, the HHS estimates that will collect a total of $6.5 billion,” the Feb. 12 notice said. “We anticipate having $7.7 billion for reinsurance payments for the 2015 benefit year,” Albright said in an e-mail.

The $7.7 billion includes $5.5 billion collected so far and another $1 billion to be collected by Nov. 15. In addition, $1.7 billion is being carried over, Albright said, noting that $500 million will be used to cover program administration and go to the U.S. Treasury general fund.

The HHS set a rate of $44 per covered life that health insurance issuers and self-insured group plans must pay to fund the reinsurance program for 2015. Plans had the option of making two payments for the program in 2016.

To contact the reporter on this story: Sara Hansard in Washington at shansard@bna.com

To contact the editor responsible for this story: Janey Cohen at jcohen@bna.com