Health Insurance Report™ helps you track and analyze legal, legislative, and regulatory developments affecting the health-insurance industry throughout implementation of the Affordable Care Act...
By Sara Hansard
Oct. 1 — Insurers requested $2.87 billion for 2014 payments under an Affordable Care Act program intended to protect them against uncertainty in claims costs, but they will receive only $362 million, the Centers for Medicare & Medicaid Services said in an Oct. 1 bulletin.
The bulletin said that based on current data from qualified health plans, the prorated payment rate will be 12.6 percent.
According to an Oct. 1 fact sheet from the Department of Health and Human Services, insurers were paid $7.9 billion for2014 under the ACA’s reinsurance program, $4.6 billion under the law’s risk adjustment program and $362 million for risk corridors.
The agency didn't include any information on payments for specific issuers as it did in June when it released a report on the other two ACA risk adjustment programs.
Section 1342 of the ACA creates a temporary risk corridors program to provide issuers of QHPs 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 Department of Health and Human Services a percentage of the difference. If an issuer’s costs are more than 103 percent of its target amount, the HHS pays it a percentage of the difference.
The risk corridors program runs from 2014 through 2016 and has been controversial, with some congressional Republicans labeling it a “bailout” for insurers. 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.
Plans that had to make payments into the ACA's risk adjustment plan—another ACA program intended to help insurance premiums remain stable in the event an insurer covers sicker-than-average enrollees—could have benefited from additional risk corridors payments, which are not likely to be forthcoming.
The HHS April 11, 2014, issued a bulletin titled “Risk Corridors and Budget Neutrality” that said if risk corridors for a particular year are insufficient to make full payments for that year, payments for the year will be reduced on a pro rata basis to the extent of any shortfall.
The risk corridor payments have been delayed as a number of issuers also had to resubmit risk corridor data because of discrepancies in the data, the CMS said in August.
The agency said it will begin collecting risk corridor charges in November and it will begin remitting payments starting in December.
“Since this is a three-year program, we will not know the total loss or gain for the full three years of the program until the fall of 2017,” the fact sheet said. “We will continue our routine program integrity efforts throughout all three years of the program. Data concerns will be addressed during our auditing process. In the event of a shortfall for the 2016 program year, HHS 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.”
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