Risk Corridors Get Federal Backing for 2015

The “risk corridor” program, a controversial provision of the Affordable Care Act (ACA), received $5.5 billion in federal funding on Friday. The program protects insurance companies against the uncertainty of pricing quality health plans (QHPs) for the 2015 health insurance exchanges by establishing a risk-sharing agreement between them and the federal government. The Congressional Budget Office estimates that the program could generate as much as $16 billion in savings for insurers, and $8 billion in payments to the government.

Some policymakers remain wary of the agreement, and suggest that the administration repeal the provision. Officials, however, continue to endorse the risk corridor program as a way to mitigate any substantial premium increases insurers would incur next year due to the risk pool. Currently, insurers are unable to determine the exact ratio of young enrollees to those who are sick and elderly.

“The insurers who signed up for the exchange did so with the understanding that their risk was limited,” said Professor Timothy Jost, a healthcare expert at the Washington and Lee University School of Law. “So repealing those risk corridors is basically breaking a contract with the insurers that if they would come into this program, there’d be some limit to their risk exposure.”

The risk corridor program will raise the administrative cost ceiling to from 20% to 22%, and increase the risk corridor profit margin floor from 3% to 5%. Those insurers that exceed earning expectations would have to return any gains to the government.

“Because we believe that the effect of the transitional policy on the risk pool will be greater in states with higher enrollment in transitional plans, we will vary the state-specific percentage adjustment to the risk corridors formula based on the percentage enrollment in transitional plans within in a state,” said a statement from The Department of Health and Human Services.

Around the Web

HHS Outlines Policy Changes to Lift Insurers [The Hill]

$5.5 Billion for Obama’s Contested Risk Corridors [The Fiscal Times]

Obama Administration Again Delays Deadline for Cancelled Plans [Washington Examiner]