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By Sara Hansard
Sept. 9 — All money collected in 2015 from a fund to protect health insurers from losses will be used to make 2014 payments and no funds will be available for 2015 payments, the Department of Health and Human Services said Sept. 9.
For 2014 the HHS only paid $362 million of $2.87 billion in claims filed by health insurers offering plans under the Affordable Care Act's temporary risk corridor program, a rate of only 12.6 percent. In November 2015 the Centers for Medicare & Medicaid Services said that if any collections for a particular year are insufficient to make payments for that year the agency would try to make it up with collections from following years.
Congressional Republicans have included language in laws signed by President Barack Obama that prevents the administration from using money outside of the risk corridor program to pay insurers, which has hurt the floundering government-sponsored nonprofit Consumer Operated and Oriented Plans and led to some lawsuits by them to recover the money. The Sept. 9 announcement wasn't a surprise, because it wasn't expected that 2015 collections would be high enough to make up the 2014 deficit as well as make payments for 2015.
“Risk corridors submissions are still undergoing review and complete information on payments and charges for the 2015 benefit year is not available at this time,” the Sept. 9 guidance said.
The risk corridor program is supposed to move money from qualified health plans that have high premiums relative to claims to plans that have higher claims than premiums. However, Deep Banerjee, director of financial services ratings at S&P Global, told Bloomberg BNA in an e-mail Sept. 9, “Our expectation is they won't have enough to cover the 2014 deficit. Simply put, we don't expect the available risk corridor money in 2015 to be enough to cover the previous year's $2.5 billion deficit.”
“Insurers incurred much larger losses in 2015 than 2014 selling Obamacare plans,” Brian Blase, a senior research fellow at George Mason University's Mercatus Center and a critic of the ACA, told Bloomberg BNA in an e-mail Sept. 9. “Therefore, it is not surprising that the risk corridor program continues to run large deficits. Congress should continue to ensure that taxpayer funds are not used to bail out insurers through risk corridors.”
The question is how the CMS may make up shortfalls under the program. The guidance said that collections will be used to pay off claims from prior years. However, “As we have said previously, in the event of a shortfall for the 2016 benefit 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.
“HHS recognizes that the Affordable Care Act requires the Secretary to make full payments to issuers,” the guidance said. “HHS will record risk corridors payments due as an obligation of the United States Government for which full payment is required.”
The guidance also referred to the lawsuits in federal court by issuers seeking to obtain the risk corridors amounts they haven't been paid.
“As in any lawsuit, the Department of Justice is vigorously defending those claims on behalf of the United States,” it said. “However, as in all cases where there is litigation risk, we are open to discussing resolution of those claims. We are willing to begin such discussions at any time.”
To contact the reporter on this story: Sara Hansard in Washington at email@example.com
To contact the editor responsible for this story: Kendra Casey Plank at firstname.lastname@example.org
Risk Corridors Payments for 2015 is at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/Downloads/Risk-Corridors-for-2015-FINAL.PDF.
The announcement of 2014 risk corridor payments is at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/Downloads/RC-Issuer-level-Report.pdf.
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
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