Obamacare came with risk protection programs for health insurers that were supposed to protect them from the uncertainties of pricing premiums for a new group of patients in the first three years of the exchanges.
But one of the premium stabilization programs became a bust after congressional Republicans, led by Sen. Marco Rubio (R-Fla.), passed appropriations legislation requiring that the Affordable Care Act’s risk corridors be financed solely from payments made by insurers.
Under the risk corridors program, in effect from 2014 through 2016, insurers were supposed to receive payments for losses that exceeded a threshold level, while insurers whose profits exceeded a threshold level had to make payments.
Exchange insurer losses far exceeded profits in their first three years, and insurer payments weren’t nearly enough to cover losses.
The result is about $12.3 billion in risk corridor payments that the government isn’t making. The Department of Health and Human Services recently released a report on the program for 2016.
“This was supposed to be a stabilizer, but it ended up being a disrupter,” Deep Banerjee, director of insurance ratings with bond rating company S&P Global Ratings, told me in an interview.
“One can’t blame all the money lost by the insurance industry on the risk corridor, but it would have offset a significant amount of the losses insurers had during the first three years of the ACA marketplace,” Banerjee said.
Three dozen lawsuits have been filed by insurers against the government to try to collect the payments.
If the insurer plaintiffs prevail in the court cases, “the federal government could owe over $12 billion,” ACA expert Timothy Jost wrote in a blog posting for Health Affairs.
Read my full article here.
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