Congress Wants Lower Reinsurance Payments to Health Insurers

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By Sara Hansard

Oct. 21 — Congressional Republicans Oct. 20 asked acting Centers for Medicare & Medicaid Services Administrator Andy Slavitt to reduce reimbursements to health insurers under an Affordable Care Act program intended to protect insurers from high claims.

The letter urged the CMS to make several changes to how it calculates and makes reinsurance payments to plans. Those changes included:

• paying 2015 plan year reimbursements under the ACA reinsurance program at a coinsurance rate of 50 percent of claims between $90,000 and $250,000;

• providing less generous funding for the 2016 plan year when it writes final rules for 2017; and

• excluding self-insured and multi-employer health plans from having to pay reinsurance fees for 2016.


The letter was signed by Senate Health, Education, Labor, and Pensions Committee Chairman Lamar Alexander (R-Tenn.), House Energy and Commerce Committee Chairman Fred Upton (R-Mich.), House Education and the Workforce Committee Chairman John Kline (R-Minn.) and 19 other congressional Republicans.

The Center for Consumer Information and Insurance Oversight on June 17 announced its intention to increase the reimbursement rate for insurance companies participating in the transitional reinsurance program to cover 100 percent of 2014 claims between $45,000 and $250,000 under the ACA's transitional reinsurance program, which is in effect from 2014 through 2016.

Earlier Regulation

In the final Notice of Benefit and Payment Parameters for 2015, which covers a wide range of policies pertaining to the ACA marketplaces and health plan regulations, HHS said that health insurers participating in the reinsurance program would be reimbursed for 80 percent of 2014 claims between $45,000 and $250,000, with excess fees collected by the HHS to be saved for the following plan year, the letter said.

The reinsurance program covers nongrandfathered plans in the individual or small group markets, it said. Nongrandfathered plans are those that took effect after the ACA was enacted in 2010.

The June 17 announcement raising the reimbursement rate from 80 percent to 100 percent creates “a disincentive for health plans to more accurately price their products in future years, knowing this federal program will pay a bigger proportion of their claims,” the congressional letter said.

“Even after the increase in 2014 plan year reimbursement to qualifying health plans, HHS will collect roughly $1.7 billion more in reinsurance fees than it will pay out in claims,” the letter said.

Much of the $10 billion paid into the reinsurance program for 2014 was contributed by employers and union members who are ineligible for reimbursement through the reinsurance program, it said. Under the ACA $6 billion is to be collected to fund the program for plan year 2015 and $4 billion for plan year 2016 from health insurers and third-party plan administrators, it said.

Don't Extend Program 

Under the ACA any additional funds not spent to reimburse health insurance companies are to be sent to the Treasury general fund, the letter said.

“Any attempts by HHS to extend this program beyond the 2016 health benefits plan year through regulations or to use the general funds from the Treasury to pay for the implementation of other [ACA] program would be an unlawful action and a rewrite of the law,” it said.

The chairman of the National Alliance of State Health Cooperatives has questioned why the federal government hasn't used excess funds it has from the reinsurance program to help struggling nonprofit CO-OPs created with federal government funding under the ACA. Eight of the CO-OPs have folded, in part because of low payments from another premium stabilization program, the risk corridors program.

Additional Guidance on Early Payments

In other guidance posted Oct. 9, the CMS said it will make an early partial payment under the reinsurance program for the 2015 benefit year early in March 2016. The early payment will “represent a portion of the full reinsurance payment that issuers will receive for the 2015 benefit year,” and reinsurance funds not paid out in the early payment will be paid in late 2016, it said.

”Surplus reinsurance funds remain available from the 2014 benefit year, which are being rolled forward for the 2015 benefit year,” the guidance said. The early partial payment will be made at a rate of 25 percent coinsurance rate on claims of between $45,000 and $250,000, it said.

The final coinsurance rate for the 2015 benefit year had been estimated at 50 percent under earlier guidance, but it will be calculated based on total available reinsurance collections, which the CMS said it expects to announce in June 2016.

To contact the reporter on this story: Sara Hansard in Washington at

To contact the editor responsible for this story: Kendra Casey Plank at

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