A recent analysis suggesting that profitable health insurers may end up paying only about 10% into the risk-corridors program established under the Affordable Care Act than what is expected to be needed to help offset claims by carriers with poor results has renewed sticker-shock fears.
Health care consumers in some parts of the U.S. may face higher premiums next year if some insurers struggle to cover their costs and Congress continues to require that the program be self-sustaining, according to Standard & Poors Ratings Services.
The S&P report examined total risk-corridor receivables and payables that carriers recorded on their financial statements. Deep Banerjee, a credit analyst who helped write the report, estimated that the shortfall could be several billion dollars. The Centers for Medicare & Medicaid Services last year indicated that current-year payments would be reduced on a pro rata basis to the extent of the shortfall, noted a recent published account.
CNBC.com reported that several carriers had risk-corridor receivables higher than 50% of their reported capital, including PreferredOne in Minnesota at 149%, Kentucky Health Cooperative at 117% and New York-based Oscar Health Insurance at 57%. In comparison, larger insurers such as Humana and Health Net were expecting risk-corridor program payouts of just 1% of equity and about 5% of capital, respectively.
The risk-corridors program was designed to help insurance carriers share financial risks during the first three years of public exchange operations in the event that premiums collected fall woefully short of claim payments.
Clare Krusing, a spokeswoman for Americas Health Insurance Plans, calls the estimate preliminary and says its still too early to assess what the risk corridor payments will be to the plans.
Whatever the case, 2015 represents a critical point for assessing risk-spreading provisions for health insurers that offer coverage on public exchanges, say Angela Boothe and Brittany La Couture of the American Action Forum. Health policy researchers will better understand budgetary impacts and whether taxpayer funded general revenue was needed to make up excessive losses sustained by the insurers in the first year of exchange implementation, they wrote in a recent report.
Also see: Top 10 health care issues of 2015
Another issue to consider is any impact on risk corridors from the much-anticipated U.S. Supreme Court decision in King v. Burwell, according to Robert Wood Johnson Foundation research published by Health Affairs. While risk corridors theoretically could compensate for the elimination of federal subsidies for Healthcare.gov enrollees, RWJF suggested the money required will likely be insufficient.
Bruce Shutan is a Los Angeles-based freelance writer.
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